Whether you’re an artist or a freelance programmer, you’ll benefit from looking ahead at your future with retirement in mind. You, unlike your salaried counterparts, don’t get a 401k package with a long-time employer or the promise of a retirement paycheck. So, what can you do?
Buy into a Union
Depending on your trade, there may be unions out there that disperse retirement funds if you paid into the union for long period. In general, a union works to benefit you, so you may find things a union offers as being helpful in the long run.
A Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) is a variant of the typical IRA, often used by employers for themselves and their employees, but there’s also a set of rules for a SEP IRA designed for self-employed persons. Funds deposited into an SEP don’t factor into your taxes for that year, as it will count as income once you withdraw at the appropriate retirement age. Today, it’s considered as 59 ½, and will be taxed in the years you begin to withdraw it. The limit on contributions usually falls around 18% of your net profit.
Though 401ks are considered a staple of a salaried job, there is a self-employed version of this retirement fund. Like an SEP IRA, it acts as a salary deferral, meaning you don’t pay taxes on the money you’ve set aside in your 401k. You can contribute up to $19,000 a year for this account.
Save, Save, Save
When you can, save! Though this seems obvious, many people may feel comfortable during profitable periods without adjusting the amount that they save, instead splurging on luxury items they couldn’t afford before. Instead of giving in to the temptation, set aside more money during periods of growth for your self-employed business. The only exception is if it benefits your business or finances. Do you have a fax machine that won’t fax? Getting that fixed is going to benefit you and your business in the long run. Paying off a bigger chunk of your loans, mortgage, or debt? That will definitely save you interest. Paying for some advertisements online will help you bring in more customers and clients. Still, keep your savings consistent during slow periods and aim to add more when you feel comfortable to do so. Unlike a traditional job, you don’t have the security of a larger business to keep you afloat when you or your industry goes through a rough patch.