How to save for retirement as a freelancer

Once you have a system or plan to save for retirement, you will need to create 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 expert 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, o Simplified Employee Retirement Plan Individual Retirement Account. Although they are available to companies of all sizes, SEPs can be used by self-employed workers 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 freelancing, Ms. Corral was able to resume saving money in a SEP-IRA. “Once I got some steady clients, the steady monthly income helped me feel comfortable putting aside the 10 percent of my gross retirement income, ”he said. She transferred her old 401 (k) lei 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 co-payments than her old job.)

The Solo 401 (k). “My preferred retirement savings option is Just 401 (k),” said Holly Larson, 55, a business to business and technology copywriter in Durham, NC, who has worked independently for over 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. “This is money the US government will allow you to deduct taxes from on top of your income, which is an amazing way to save for retirement and cut taxes.”

The Health Savings Account, or HSA 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.

“The benefit of an HSA is the ability to save money with pre-tax dollars,” said Ms. Brown. “While the funds can be used to pay for out-of-pocket medical bills, including deductibles, you can choose to keep the funds in your HSA and use it 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 pay an additional $ 1,000 recovery fee. At the age of 65, these account holders can withdraw money into an HSA for any reason, not just medical bills. Distributions for qualified medical expenses are not taxed, but other levies are taxable.