Securing financial wellness at different ages is very important. Especially, when it comes to saving for your retirement, you have to make plans early on. An effective and skillful way to save for your retirement is by freelancing.
Many of us know about freelancing as a side hustle. However, there is so much more to that. As a freelancer, you get to choose your work, the hours you are putting into work, and every other related aspect of the work. So, freelancing can be a remarkable way for both youngsters and professionals to start saving for retirement.
The biggest obstacle for a freelancer to save for retirement is taking action. That is, you have to take initiative to set aside the money for retirement. The planning and necessary procedures must be carried out by the freelancer. So, it contrasts the traditional way of retirement pay-plan schemes in your workplaces.
According to Lazetta Rainey Braxton of 2050 Wealth Partners, freelancers incur additional expenses in comparison to office-going workers and employees. At the same time, their monthly incomes can differ from time to time. Hence, the retirement saving plan for freelancers can become quite challenging in multiple ways.
However, there are still different courses of action that you can follow as a freelancer to save effectively for retirement. A retirement plan can be challenging for anyone to navigate through. Simultaneously, for freelancers choosing the right retirement savings plan can be challenging.
Luckily, some great ways can help freelancers to start saving up for their retirement.
Build An Emergency Fund: The first step to ensuring a fruitful retirement fund is effective planning. So, at first, you must set aside an emergency fund.
For beginners, starting with $1,000 can be a good way to continue. The ideal goal is to save up to 3 to 6 months of expenses. The safest position is when you can cover 12 months of expenses. Building an emergency fund for freelancers is vital since fluctuation in income can create many difficulties for you.
Health Savings Account: Freelancers have to pay for their health insurance. You can qualify to open a Health Savings Account or HAS if you have a high-deductible health insurance plan.
HAS accounts are beneficial to assist retirement savings because they allow putting aside money with pretax dollars. At 65, the account holders can withdraw the money for any reason other than medical costs. So, it proves to be a great investment plan for freelancers.
The SEP-IRA: Simplified Employee Pension plan– Individual Retirement Account (SEP-IRA) are available for businesses of all sizes. Especially for self-employed people like freelancers, it is a great savings plan.
SEP-IRA can contribute up to 25% of net income after expenses. So, it can be a stable source of income after your income, which is a great way to plan for retirement. Similarly, this plan is easy to set up with low operating costs. With flexible annual contributions, you can solve your cash flow issues.
The Solo 401(k): Through the Solo 401(k) retirement plan, you can save for your retirement directly in the account. As of 2022, for workers under 50, the annual contribution limit is $20,500 per year.
The government will allow the freelancers to tax-deduct right from their revenue. So, this becomes an excellent retirement planning option for freelancers.
It is never too early to start saving up for your retirement. Especially for freelancers, having stable retirement planning can be crucial. Thus, in these ways, you can work towards saving up for your retirement right now. To discuss more, join our forum. Become a member by registering now.