As a freelancer, you are in control of your career. This means that you can choose when and how to work, which can be a great benefit. However, it also means you are responsible for your retirement savings.
Freelancers do not have access to employer-sponsored retirement plans, such as 401(k)s or pensions. This can make it challenging to save for retirement, but there are several methods that can help freelancers save for their golden years.
According to William Schantz of Mid Atlantic Financial LLC, the most common retirement-saving method is through an employer-sponsored retirement plan, such as a 401(k). However, freelancers do not have access to these types of plans. In addition, traditional methods of retirement savings, such as IRAs and annuities, may not be well suited for freelancers. This is because these methods typically require a steady income stream, which can be challenging to maintain as a freelancer.
William Schantz Explains Saving Methods
There are several methods that freelancers can use to save for retirement. These include:
Individual Retirement Accounts
IRAs accounts that can be used for retirement savings with some tax advantages. There are two kinds of IRAs: Roth and traditional. Traditional IRAs offer tax breaks on the money that is contributed to the account, while Roth IRAs offer tax breaks on the money withdrawn from the account.
An annuity is a contract between you and an insurance company. With an annuity, you make payments to the insurance company over time. In exchange, the insurance company agrees to make payments to you in the future, typically during retirement. There are two main types of annuities: fixed and variable.
According to William Schantz, annuities offer a guaranteed stream of income during retirement. They are a great way to supplement other retirement savings plans and help protect your savings against inflation.
However, annuities can be expensive, and you will be liable to pay taxes on any income you receive. You may even have to pay penalties if you withdraw money from an annuity before retirement age.
Simplified Employee Pension IRAs
SEP IRAs are retirement accounts available to self-employed individuals and small business owners. SEP IRAs offer many of the same benefits as traditional IRAs but have higher contribution limits.
Solo 401(k) Accounts
Solo 401(k) accounts are retirement accounts available to self-employed individuals and small business owners. Solo 401(k) accounts offer many of the same benefits as traditional 401(k)s but have higher contribution limits.
There is No One-Size-Fits-All Method
According to William Schantz, there is no one-size-fits-all solution for retirement savings. Freelancers should consider their individual needs and circumstances before choosing a retirement savings method.
One of the most important factors to consider is your income. If you have a relatively high income, you may want to consider a traditional IRA or a Solo 401(k). These accounts offer tax breaks on the money you contribute, which can help you save more for retirement.
You may want to consider a Roth IRA if you have a lower income. With a Roth IRA, you won’t get a tax break on the money you contribute, but you will get a tax break on the money you withdraw during retirement.
Another factor to consider is your age. If you are closer to retirement age, you may want to consider an annuity. An annuity can provide a guaranteed stream of income during retirement.
Whatever method you choose, the most important thing is to start saving for retirement as early as possible. The sooner you start, the more time your money will have to grow.
William Schantz’s Final Thoughts
The methods discussed here by William Schantz are just a few options available to freelancers. There are many other retirement savings methods, including 401(k)s and 403(b)s. The idea is to start saving for your retirement as early as possible. This will allow you to build a larger budget as you will be working longer. Freelancers can and should consult with a financial advisor to discuss the best options for their individual needs.