How To Save for Retirement as a Freelancer

One of the best ways to save for retirement as a freelancer is through an Individual Retirement Account (IRA). Even freelancers without any employees can open a Traditional IRA, which allows you to deduct contributions and tax the money you withdraw from the account at retirement as income. Roth IRAs are similar to traditional IRAs, but they don’t allow you to deduct the contributions you make. In 2019, the maximum contribution you can make to an IRA is $6,000 per year.


As a freelancer, one option for retirement savings is to set up a SEP IRA. This plan is easy to set up and maintain. Most banks offer it has few fees. As of 2014, you can contribute up to 25 percent of your compensation into this account. The amount you contribute is tax-free, but your withdrawals at retirement are taxed.

A solo 401(k) account is also flexible, so you can make withdrawals on your own terms. You can even make hardship withdrawals without incurring tax penalties. In addition, some solo 401(k) plans allow you to take loans up to $50,000. However, you have to repay them within five years, or they’ll count as taxable distributions.

For self-employed freelancers, the most effective way to save for retirement is to set up automatic contributions. This way, your contributions mimic the direct deposits you receive from your employer’s 401(k) account. However, setting up automatic contributions for freelancers is difficult because their income fluctuates on a weekly basis. Setting up calendar reminders to contribute can help you track your income.

Solo 401(k)

If you’re a freelancer, you’ll want to consider opening a solo 401(k) account. This account allows you to contribute a higher percentage of your earnings than a traditional IRA. Also, you can contribute up to $58,000 instead of $13,500, which means you’ll get a bigger tax break. However, it’s important to remember that you may not have a lot of extra cash to contribute to a solo 401(k). If this is the case, it may be wise to open a traditional IRA.

Whether you’re a sole proprietor or run a small business, a solo 401(k) is a great way to build a nest egg and enjoy retirement life. It also makes it easier to track investments and monitor your investments, since you’ll only have one account to track. Luckily, there are several great solo 401(k) providers to choose from. One of the best options is Charles Schwab. You can even open one online.

The first step to establishing a solo 401(k) is obtaining an EIN (Employer Identification Number). An EIN is required by law for self-employed individuals to be eligible for a 401(k) plan. You can obtain this number through the IRS. Once you have your EIN, you can open an account with a solo 401(k) provider.

Roth IRA

When you are a freelancer, you may not have access to employer-sponsored retirement plans, but you do have more options than ever. You can open a Roth IRA or SEP IRA and contribute up to 25% of your compensation. You can save up to $52,000 per year with this type of account, but you must earn at least $208,000 a year in order to contribute the maximum. These accounts are relatively simple to open and maintain, with no annual or establishment fees. However, you must remember that withdrawals are subject to a 10 percent tax penalty.

The great thing about a Roth IRA is that you can withdraw money tax and penalty-free as long as it’s from your principal. However, you must be at least 59 1/2 years old to withdraw contributions and earnings from your account. Withdrawals made before retirement are subject to a 10% penalty.

Money market account

If you are a freelancer, you will want to open a money market account. This account allows you to earn higher interest, while maintaining the flexibility of a savings account. A freelancer should also have some money set aside for emergencies, so that they don’t have to borrow money for immediate needs.

A freelancer will be able to contribute up to $6,000 a year into a money market account. You can also consider contributing to a Roth IRA or a traditional IRA. Roth IRAs are better suited to freelancers who earn less money.

There are many different types of IRAs, so you’ll want to consider your financial needs and goals. When choosing a retirement plan, save at least 15% of your pre-tax income each year. You can also take advantage of employer matching for extra savings.

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