Planning for retirement can be a daunting task for a freelancer, especially if you don’t have much money saved or do not have a strategy in place. And if you fall into the latter category of those who haven’t planned for retirement, fortunately, it’s not too late to start. You will, however, need to begin saving money sooner rather than later.
If you are late to the savings plan, you’re not alone. According to “The 2016 Retirement Confidence Survey” from the EBRI Issue Brief, 54% of workers surveyed report the total value of their household’s savings and investments is less than $25,000, which includes 26% of workers with less than $1,000 in savings.
So where do you begin?
Decide what retirement account is right for you
There are a lot of retirement account options available to freelancers, some common ones are a Traditional IRA, Roth IRA or SEP IRA. There are some important differences with each, such as the maximum amount you can contribute each year. With a Traditional IRA or Roth IRA, the 2016 limit is $5,500 annually or $6,500 annually if you’re 50 or older. If you qualify for a SEP, you may be able to potentially save up to $53,000 a year ($54,000 for 2017) depending on your income and other individual circumstances.
Consider how much you are able to save
The next step is to consider how much you are able to save on a regular basis. If possible, consider putting away at least 15% of your income in your retirement funds. If that’s too much right now, determine what amount works with your budget, and increase it when you can. Take a look at your current finances – perhaps you can find room for a one-time contribution to kick start your retirement account.
Remember, it is never too late to start saving for retirement. Regardless of your age, there are investments vehicles that can help you seek to grow your savings.
Paragraph 1: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
Paragraph 1: https://www.irs.gov/retirement-plans/operating-a-sep
Goldman Sachs & Co. LLC (“GS&Co.”) does not provide accounting, tax or legal advice. Nothing communicated to you on this website should be considered tax advice. You should consult an independent tax professional regarding your personal circumstances. This material is provided solely on the basis that it is educational only and will not constitute investment advice. GS&Co. is not a fiduciary with respect to any person or plan by reason of providing the material or content herein.</font size>