How to Save for Retirement When Your Income Depends on Commission

Imagine you work in sales or as a freelancer. Each month your income varies: in one month you might earn a large commission from a deal, in another you might face a complete lull. This fluctuation creates a feeling of instability, especially when you start thinking about the future and planning for a comfortable retirement.

Why You Need a Flexible Savings Plan for Variable Income

When your salary is fixed, it is easy to calculate a certain percentage of income to allocate to a pension. But with commissions, the figures fluctuate from month to month, and it can be tempting to spend everything that comes in during the good months and let the surplus go to waste. As a result, a deficit builds up in the retirement fund and the idea of a comfortable retirement becomes a distant dream.

The strategy I will outline is based on two basic principles: first, consistency in the percentage—that is, you determine a percentage of each payment (commission or project fee) and transfer it immediately to a savings account; second, automatic accumulation through technical tools that ensure no payment is missed.

Step 1 – Determine the Percentage You Can Commit To

Start with a small percentage, for example 10% of each commission. If your income averages 5000 riyals in a quiet month, you will transfer 500 riyals to the fund. If the commission rises to 20000 riyals, 2000 riyals will be transferred automatically. The idea is that the percentage stays fixed, but the amount transferred increases with each payment.

Choose a percentage that fits your current lifestyle. If you feel 10% is too high, reduce it to 5% and then increase it gradually as your financial capacity improves.

Step 2 – Open a Dedicated Retirement Savings Account

It is preferable to have the account separate from your daily savings account to avoid the temptation to spend. Look for a savings account that offers compound interest or a low-cost investment account. Some banks allow you to open a “retirement” account with a low minimum balance, and some financial apps provide a “retirement fund” with an easy-to-use interface.

The important thing is that the account has a clear IBAN or account number so you can transfer money to it automatically.

Step 3 – Use Automatic Transfer Tools

Most banking apps allow you to set up a “recurring transfer” with no limit on the amount. Use this feature to set up an automatic transfer as soon as any payment arrives in your main account. For example, if a commission reaches your account at the end of the month, the system will transfer 10% directly to your retirement account.

If you use a freelance platform such as Upwork or Freelancer, you can link your bank account and activate “transfer rules”. You will see a confirmation message whenever a percentage of the payment is transferred.

Step 4 – Review Performance Every Three Months

Checking the fund balance should not be a monthly burden. Make a quarterly review a habit. During this review, answer two simple questions:

• Are you still able to stick to the set percentage?
• Do you need to adjust the percentage because your income has risen or fallen?

If you find the percentage is still comfortable, continue with it. If you notice that some months do not cover basic expenses, you can temporarily lower the percentage and then raise it when income improves.

Step 5 – Diversify the Fund’s Investments

The retirement fund should not remain in a simple savings account. Once a reasonable amount has accumulated (for example 20,000 riyals), consider distributing it across investment tools with a fixed return such as bonds or sukuk, or into low-cost investment funds. Diversification reduces risk and increases the chances of achieving a higher return over the long term.

If you prefer simplicity, choose an investment fund with low management fees (less than 0.5% per year). This type ensures that most of the return stays in your account and is not drained by fees.

Practical Example: Sarah’s Story, a Sales Representative

Sarah works in selling home appliances and earns a basic salary of 3000 riyals plus a commission ranging from 500 to 5000 riyals per month. Initially she decided to allocate 8% of each commission to her pension. When she received a commission of 3000 riyals, she transferred 240 riyals to her retirement account. In another month the commission reached 5000 riyals, so she transferred 400 riyals. Over a year, she accumulated about 4000 riyals in the fund.

After two years, the commission percentage rose to 10% and her profits increased gradually. Now, with more than 30,000 riyals in the fund, Sarah decided to transfer part of the amount to a medium-risk investment fund that guarantees a fixed return ranging from 5-6% per year.

Step 6 – Keep Flexibility for Emergency Situations

Retirement savings should not be completely locked away; emergencies sometimes require withdrawing part of the fund. Therefore, ensure you keep a small percentage (for example 10%) of the fund in a liquid account that can be accessed easily. This way, you will not need to borrow or rely on high-interest loans when facing an emergency call.

Quick Summary of the Steps

• Set a fixed percentage of each commission or project fee.
• Open a dedicated retirement savings account.
• Use automatic transfer tools to allocate the percentage as soon as the payment arrives.
• Review performance every three months and adjust the percentage if necessary.
• Diversify the fund’s investments after accumulating a sufficient amount.
• Keep a liquid portion for emergencies to avoid draining the entire fund.

Retirement does not wait for anyone, even if your income is not fixed. By implementing this strategy, you will achieve a balance between living now and feeling secure about the future, without needing to worry about income fluctuations.