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الجمعة، 5 أكتوبر 2018

This Full-Time Freelancer Shares Her 4 Key Tips on Saving for Retirement


Working for myself has afforded me many luxuries. Aside from the fact that I’m writing in my pajamas right now, I also get to select where and when I hold office hours. I even get to choose the direction of my creative pursuits, which has been the most freeing aspect of all.

However, some difficulties come with self-employment. One of the biggest has been saving for my retirement since my employers had always facilitated that in the past. My husband just so happens to be a financial adviser, though, so he's helped me figure out ways to make it happen.

It’s time for me to share the wealth. Here are the best tips I’ve learned that you can implement if you’re saving on your own, supplementing a bare-bones program at the office or anything in between.

1. Budget Like a Boss

The first step to saving is to carve out the money you'll put into your retirement account. This is no simple task, especially if your business isn't quite booming yet, or your income isn’t consistent. However, I’ve found that, with a bit of finesse, there’s always a little bit you can save. No matter how small a sum that ends up being, you’ll be glad later that you set it aside now.

So I suggest that you start this process by budgeting well. Take your self-employment income and calculate how much of it will have to go to federal and state taxes. In fact, you’d be smart to set aside a percentage of your income each month so that you’re not scrambling when April rolls around. This has helped me get through tax season without a full-on panic — imagine that!

Once you have your actual post-tax income, divide it based on necessities: rent/mortgage, transportation costs, utilities, food and other expenditures. You’ll probably have some left over, and from there I suggest you divide it into two categories: wants and savings. Some experts recommend contributing 30% to wants and 20% to savings, but you can funnel more or less into each depending on how much you’ve already saved for retirement. And if there’s any left over from the “want” pile, I would definitely put that into savings at the end of the month.

2. Know How Much to Save

A cool $100K sounds nice, but how long will that last you once you’re retired? Spoiler alert: It won’t get you far. So, as part of your retirement savings plan, you should figure out just how much money you want to save over the course of your freelancing career.

On this one, I cheat a little bit — I use an online calculator from my bank to figure out how much of my income should be set aside. The calculator considers how much I already have in savings, how much my husband makes, how much we expect our income to jump over the next few decades and other important factors.

From there, the calculator will tell me how long my money will last me, considering the age at which I plan to retire.

This isn’t a one-time process. Instead, as you begin to save and grow your business, recalculate your retirement plan using this handy online tool. That way, you can ensure you’re on the right track — or even exceeding expectations — with your current savings plan. It feels good to see that I’m chipping away at that final number since saving for retirement can sometimes feel like such a daunting task.

3. Choose the Right Savings Account(s)

When your employer gives you investment account options, you typically decide between a 401(k) and a 403(b). If you’re lucky, you have a pension plan, too. We freelancers aren’t as lucky — we’re in charge of deciding where we put our money and how it’ll grow.

I’m here to tell you not to look at this as a negative. It’s a big benefit that you have a world of choice when it comes to the investment strategies you use. Each option has its own benefits — here’s a bit about each one of the potential places to put your money:

  • SIMPLE IRA: With this account, you can funnel up to $12,500 per year — $15,500 per year if you’re 50 or older — into your savings. SIMPLE stands for Savings Incentive Match Plan for Employees, which means you can provide retirement savings boosts for any of your small business’s employees or for yourself. Matching just two to three percent of your personal contribution could further pad out your retirement account.
  • SEP IRA: The Simplified Employee Pension is, well, simple. You’re allowed to put 25% of your earnings, or $54,000 per year, into the account, whichever is less. You can choose to deposit money before taxes or opt for a tax deduction on money that’s added after tax.
  • Solo 401(K): The solo 401(k) has plenty of benefits, but it’s available only if you’re a sole proprietor or if you and your spouse share the business. If those parameters apply to you though, the solo 401(k) allows you to invest more than some of the other accounts on this list. Not only can you set aside $18,000 per year of your personal earnings, but the company can contribute 25% of its earnings each year, too.
  • IRA or Roth IRA: These accounts are great supplements to the aforementioned options, since they limit you to a $5,500 annual contribution. The traditional IRA allows you to make tax-deductible deposits that aren’t taxed until they’re withdrawn. The Roth account works oppositely — money is taxed beforehand, but there are no fees when you take it out.

4. Get a Second Opinion

You might’ve noticed that I didn’t tell you which retirement account to choose. That’s because everyone’s financial situation is different, as are their savings needs. As much time as I’ve put into planning my retirement, I’m no expert on what’s best for your money at this stage in your life.

So if you're unsure which type of account to open, your best bet is to seek the help of a financial adviser or a trusted friend or family member who's a pro with this type of thing. My husband helped me put my savings in the right place, and together we’re growing a retirement account that will let us live comfortably in the future. Your financial adviser can help you do the same.

Thinking about all of this is a great step, but it’s up to you to take action. Now that you know how it’s done, all you have left to do is put these tips into practice. Before you know it, you’ll be saving for retirement, too — and resting a bit easier knowing you’ve got your finances in order way ahead of time.

Sarah Landrum is a freelance writer and the founder of millennial career and lifestyle blog, Punched Clocks. Follow Sarah on Twitter @SarahLandrum and subscribe to her newsletter for more tips on managing your money and your career.

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