Many people who work for an employer may take for granted the availability of 401(k) retirement packages and other retirement savings accounts that employers offer and contribute to. Freelance contractors, on the other hand, do not automatically have that retirement safety net offered to them. Being a freelancer has many advantages, but one of the decided disadvantages is a lack of retirement benefits. However, a financially conscious freelance contractor can make sure that they set themselves up for a comfortable retirement. Get to know some of the ways that you can start your retirement planning as a freelance contractor so that you can be sure that you are prepared for your future.
The First Step Is To Start Saving
Even before you set up retirement specific accounts, you will want to start automatically setting money aside to save for the future. Just as you set money aside each time you get paid for your tax obligation, you should do the same for retirement.
Many employers that offer retirement benefits allow employees to select how much of their paychecks are put aside for retirement. They will then offer to match the employee contribution to their retirement accounts up to a certain percentage (usually no more than three to five percent). This gives you an idea of how much you may want to start setting aside to save for the future.
If an employer will match a retirement contribution of up to around five percent, a safe bet is for you to try to set aside between five and ten percent of each payment you receive for your freelance services just for your retirement purposes. Even if you just put this money in a separate savings account to start off with, you will be doing your future self a huge favor.
Consider Your Retirement Account Options
There are many different types of retirement investment accounts available to you as a freelance contractor. You need to choose the right options for you. A simple IRA may be a good place to start if you are just getting started in the freelance world and may not be able to contribute a great deal to your retirement at first. These accounts have a relatively low annual contribution limit and allow you to make pre-tax contributions to your retirement account.
If you are looking for a retirement account that you can make either pre-tax or after-tax contributions to and that has higher contribution limits, then you may want to go for a solo 401(k). This is a more complicated retirement plan in the paperwork and maintenance you have to do for the account but is more similar to the retirement options available through employers.
Now that you know a few of the steps to take to begin your retirement planning as a freelance contractor, you can be sure that you are doing everything you can to protect your financial future.
For more information, contact a company like Family Financial Partners.