How Freelancers Can Plan For Retirement

It doesn’t matter what plan you decide to go with – what matters is that you start saving. Here are a few ways that freelancers can plan for retirement.

Money savings. Photo  Credit: Halfpoint / Shutterstock

Featured Image Credit: Halfpoint / Shutterstock 

With great freedom comes great responsibility. Or, at least that’s the case when it comes to freelancing. The flexibility working as a freelancer offers is an incredible benefit. You can set your own hours, choose your own projects, and work where you are most comfortable. On the flip side, you are responsible for all of the accounting and business-management that comes with entrepreneurship. These are manageable responsibilities, but they are important ones.

One of the most important things a freelancer is responsible for is choosing a plan to save for retirement. While most employees do whatever their employer offers, a freelancer has a few different choices. It doesn’t matter what plan you decide to go with, what matters is that you start saving. Even a little bit at a time will eventually add up and having a nest egg will make retirement much more comfortable. You should set aside at least a small percentage of your monthly income for retirement, but the way that those contributions grow depends on the plan you choose.

Here are a few ways that freelancers can plan for retirement:

Traditional IRA

You’ve probably heard the term IRA thrown about in regards to retirement, but what does it really mean? IRA stands for “Individual Retirement Account.” This is a way to accumulate savings in a tax-smart way. The most basic, or traditional, IRA allows you to put money aside for retirement and claim it as a deductible on your taxes. If you are able to deduct these funds from your taxes, then you can grow the fund as a tax-deferred sum. Later, when you retire, you will be taxed on the money that you withdraw. An IRA allows you to choose the level of “risk” that you are comfortable with which will also have an affect on the growth of the fund.

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Mike Nolan 5 years ago Member's comment

Some good tips here, thanks.