How to save for retirement as a freelancer

Once you have a retirement savings system or plan, you will need to create one or more retirement accounts where your money can live and grow.

These are the top four retirement savings options for freelancers, according to Atiya Brown, CPA and president of Savvy Accountant, a full-service virtual accounting firm. “It’s important to invest the dollars you save for retirement instead of keeping it all in cash,” she said.

The SEP-IRA, or individual retirement account of the Simplified Employee Retirement Scheme. Although available to businesses of all sizes, SEPs can be used by the self-employed and have contribution limits that change from year to year. In 2022, workers using this type of IRA can contribute up to 25% of net income (after expenses), or $61,000, Henry-Moreland said.

After a year of freelance work, Ms. Corral was able to start saving money in a SEP-IRA again. mentioned. She transferred her old 401(k) to a SEP-IRA at TD Ameritrade. (As for health insurance, she was able to get a policy through the Affordable Care Act, albeit with higher deductibles and copayments 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 and technology writer in Durham, North Carolina, who has been freelance 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. “It’s money that the US government will allow you to deduct from your income, which is an amazing way to save for retirement and reduce taxes.”

Health Savings Account, or HSA As a self-employed person, 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 can open a health insurance account. health savings.

“The benefit of an HSA is the ability to set aside money with pre-tax dollars,” Ms. Brown said. “Although the funds can be used to pay out-of-pocket medical expenses, including deductibles, you can choose to keep the funds in your HSA and use them as an investment vehicle.” In 2022, the contribution limit for an individual is $3,650 and for a family it is $7,300. If you are 55 or older, you can make an additional $1,000 catch-up contribution. At age 65, these account holders can withdraw money from an HSA for any reason, not just for medical expenses. Distributions for eligible medical expenses are not taxed, but other withdrawals are taxable.

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