6 Retirement Planning Tips For Aspiring Solopreneurs

6 Retirement Planning Tips For Aspiring Solopreneurs

It’s never too young to start planning for retirement, especially if you’re a freelancer or “solopreneur.” You may already be familiar with the inconsistencies of the industry, so how do you make sure you have enough cash to get by and save for retirement?

There are a number of standard practices that you can put to action in order to amass a fruitful retirement fund that will keep you afloat throughout your golden years.

Here are six tips you should keep in mind when tackling retirement if you’re a freelancer.

Determine what retirement will look like

Are you looking for a full-fledged retirement? Or maybe you’d like to continue working in your 60s and 70s, and so seek just a partial retirement.

If you’re hoping for full retirement, make sure you take on as much work as you can handle throughout your youth, and don’t be afraid to negotiate your salary and set competitive rates that will help you save up. After all, you possess a skill that’s in high demand, and the more practice you put into it, the more valuable your services will be.

Understand the nature of being a solopreneur

Working for a company takes away part of your freedom in the workplace and keeps you pinned to one institution’s style and practices. After all, this is why you’ve decided to work as a freelancer for the rest of your career. However, being a solopreneur comes with its own set of drawbacks. For example, work can sometimes be inconsistent and hard to find, even if you have several years of experience.

Due to these inconsistencies in the industry, it’s wise to put the pedal to the metal once the work does come. Of course, you don’t want to go to workaholic-type extremes—there’s more to life than working 80 hours a week.

Develop a repertoire with clients

It’s hard to find your footing at the beginning of your freelance career. For example, a content writer may not know whether they want to write tech articles, stock market analysis or entertainment pieces. The first order of business is to explore various industries until you find your niche.

Once you figure out what your talents are suited for, seek out jobs that offer the opportunity for extensive work over a number of years. Once you become more confident and experienced in your niche, you’ll be able to negotiate a higher salary for your services.

Consider your retirement options

You still have plenty of retirement investing options as a solo business owner. For example, the Solo 401(k) is the way to go for most freelancers as it allows you to add up to $18,000 of pretax money to your account per year, plus an additional $5,500 for people 50 and older. You can also include 25% of your annual compensation for non-elective contributions that top out at $54,000.

The IRA and Roth IRA are also options, with the former growing deferred with taxes due at withdrawal, while the latter grows tax free. If you’re unsure which plans make sense for you, the answer lies in your tax bracket. If you may eventually be part of a larger tax bracket, then the Roth IRA is the way to go as you can pay fewer taxes now.

Consider alternative options

Are you considering adding other workers to your business?The Simplified Employee Pension IRA (SEP IRA) allows you to contribute a larger portion to your retirement fund than the IRA and Roth IRA. The plan allows you to put up to 25% of your net earnings in retirement accounts for yourself and your employees, maxing out at $54,000 in 2017.

Manage debt accordingly

If student loans and credit card debt are still bogging you down, make sure you stay on top of your monthly payments, but don’t inject all your extra cash into paying off debt. Pay your monthly due along with any added interests to keep your debt at bay, and perhaps even a little extra to slowly dwindle it down.

You should also keep an emergency fund in case your car breaks down or you face a medical emergency. Limit your spending for entertainment purposes, but make sure you still have a life outside of your workplace that you can be proud of.