There have never been more opportunities for industrious workers to make their careers out of independent freelancing. It’s an attractive option that holds many benefits for skilled workers who enjoy the freedom of being their own boss. Along with the various benefits freelancers enjoy, though, comes a type of freedom that may be less desirable: total freedom of retirement planning. Whereas local professionals in corporate settings in and around Newport Beach stand to benefit immensely from decades of retirement assistance in the form of a 401(k) plan with employer matches, those who are self-employed will be tasked with doing much of the heavy lifting of retirement planning through their own initiative and determination.
With the plight of the industrious self-employed in mind, I wanted to highlight some savings options that freelancers stand to benefit from.
Roth IRAs
Freelancers are faced with budgeting difficulties full-timers don’t have, such as dealing with dry spells. A Roth IRA, which differs from a traditional IRA in that your money is taxed at the time of contribution, but withdrawals can be made tax-free—may make good sense for many self-employed individuals. A Roth is an enticing option because once you make a contribution, the money is allowed to grow tax-free until you need it. Because you’ve already been taxed on the money, you’re allowed to make tax-free withdrawals, such as in the event of an emergency. This added versatility makes it a good option if you’re self-employed.
SEP IRAs
A simplified employee pension plan (or SEP) can be another way to ramp up the amount you put away. You can add up to 20% of your annual income (or $53,000, whichever is less), giving this option higher limits than those of the other IRA options. If you’re a small business that employs a number of people, you are able to offer them an SEP plan, too, making it a great way to contribute to the retirement of your employees.
Solo 401(k)
Yet another instrument available to the self-employed, a solo 401(k) allows you to put away $18,000 each year tax deferred. Not enough for you? As a self-employed individual, you’ll also be able to contribute 20% or so, or $53,000, whichever is less, as your own boss.
Just because you prefer to work on your own doesn’t mean you need to go about retirement planning on your own. If you’re in the Newport Beach area and are interested in getting a little help—or even a lot of help—the earlier the better. Give Miramontes Capital a call today.