Savings and investment vehicles
Once you have a system or plan for saving for retirement, you’ll need to set up one or more retirement accounts where your money can live and grow.
These are the four primary retirement savings options for freelancers, according to Atiya Brown, a certified public accountant and president of the Savvy Accountant, a virtual full-service accounting firm. “It’s important to invest the dollars you save for retirement instead of keeping it all in cash,” she said.
The S.E.P.-I.R.A., or Simplified Employee Pension plan individual retirement account. Though they are available to businesses of all sizes, S.E.P.s can be used by the self-employed and have contribution limits that change from year to year. In 2022, workers using this type of I.R.A. can contribute up to 25 percent of net income (after expenses), or $61,000, Mr. Henry-Moreland said.
After one year of freelancing, Ms. Corral was able to resume saving money in a S.E.P.-I.R.A. “Once I landed some retainer clients, the consistent monthly revenue helped me feel comfortable about putting aside 10 percent of my gross income for retirement,” she said. She rolled over her old 401(k) to a S.E.P.-I.R.A. at TD Ameritrade. (As for health insurance, she was able to get a policy through the Affordable Care Act, although with higher deductibles and co-pays than at her old job.)
The Solo 401(k). “My favorite retirement savings option is the Solo 401(k),” said Holly Larson, 55, a business to business and technology copywriter in Durham, N.C., who has been working independently for more than 20 years. “In 2022, I can contribute up to $67,500, and you can contribute up to $61,000 if you’re under 50,” she said. “That’s money the U.S. government will allow you to tax-deduct right off the top of your revenue, which is an incredible way to save for retirement, and decrease taxes.”
The Health Savings Account, or H.S.A. As a freelancer, you may have to pay for your health insurance. If you have a high-deductible health insurance plan (defined by the Internal Revenue Service as a plan with an annual deductible of at least $1,400 per individual and $2,800 per family), you are eligible to open a Health Savings Account.
Image and article originally from www.nytimes.com. Read the original article here.