5 Ways Gig Workers Can Save for Retirement

freelancer

Are you a freelancer, gig worker, or a self-employed person looking for ways to save for your retirement?

A huge number of people are realizing the health, wealth and other long term gains of working for yourself than being an employee. In the old days– due to the rise of the industrial revolution– Americans were conditioned to work for a corporation until they got old and then enjoying their twilight years on pension or retirement plans offered by the employers. But things have changed in the past decade.

Gigi workers are on a rise and they are looking for ways to get the same security and benefits that their forebears had. But is it possible to be financially secure while working for yourself?

Here are a few sensible ways a gig worker can save for retirement.

1. Contribute to a self-employed 401(k) or solo 401(k) plan

A self-employed 401(k) or solo 401(k) plan was created for self-employed people who work for themselves and have no employees working for them(other than their spouse, children, family members, etc). This retirement plan has similar benefits to the one that is provided by an employer. You have to contribute each month from your pre-tax earnings. So, you don’t have to feel insecure(as for as your retirement is concerned) just because you don’t work for an organization like others.

2. Open a SIMPLE IRA account

SIMPLE IRA stands for “Savings Incentive Match Plan for Employees- Individual Retirement Account”. With SIMPLE IRA you can contribute each year up to $12,500. People over 50 years of age can also make an additional contribution of $3,000. This makes your annual contribution of $15,500(from pre-tax earnings). Although the contributions are quite less compared to other retirement plans mentioned in this post, a freelance worker with low income might find it suitable.

3. Invest in Mutual Funds

Want the safest and the most profitable investment option for your retirement?

Mutual funds might be your safest bet. According to a report by the Investment Company Institue, “an estimated 100 million individual Americans in 56.2 million households owned mutual funds in mid-2017”. When almost every household relies on mutual funds for their retirement savings, why wouldn’t you, as a freelancer or a self-employed person, invest in them?

4. Make larger contributions with Simplified employee pension (SEP)

Want a retirement plan tailor-made for a gig worker?

SEP IRA is a traditional IRA for a freelancer, gig worker, contract worker, or a self-employed person. Similar to other plans like 401k, the contributions you do to the SEP-IRA are tax-deductible.

Allowance to make larger contributions is the biggest benefit of choosing a SEP IRA as your retirement plan. According to the IRS website, a self-employed person can contribute as much as 25 percent(annually) of his/her net earnings from self-employment. The maximum limit is $56,000 in 2019. This is way higher than the SIMPLE IRA plan.

5. Set up a Payroll deduction IRA

Payroll deduction IRA might be the right choice for someone looking for an easy and fuss-free retirement plan. To get started, you have to establish a traditional or Roth IRA with a financial institution. Secondly, make contributions to the financial institution as per your IRA plan. You do have to pay a $10 setup fee and a $10 annual maintenance fee.

Conclusion

Working for yourself has its pros and cons. Not having financial security is one of the cons of freelancing or being self-employed. But with plans like SIMPLE IRA and SEP IRA, you can easily contribute each month and have your future secured.

The Pros & Cons of Renting Alone vs. Renting with Roommates

renting

The great thing about being a renter is the flexibility of your living arrangements. From space to budget and amenities, renting an apartment is a good fit for different people at different times. Depending on your situation—as well as your personality—another very important question to ask yourself is “Should I rent alone or find a roommate?” 

As with most things, there are pros and cons to either option, so there is not one correct answer. Evaluate your situation, think about what type of person you are, and then decide if roommates or solitude are your best fit. 

Renting Alone

If you decide to rent your own place, you’ll have a lot of freedom. You can personalize every room the way you want to, without having to worry about the preferences of anyone else, other than the landlord. You also don’t have to think about abiding to someone else’s schedule; so, any time you feel like singing or watching TV or blending some fruits, you can make all the noise you want.

Privacy is guaranteed, and it weighs a great deal if you’re someone who needs their space. However, if you like having people around and you’re not used to being on your own, it might be difficult to deal with all the alone time.

Renting alone also comes with a lot of responsibility, meaning you’ll have to clean and maintain the apartment yourself, pay the bills on time, and manage the costs of groceries and other expenses on your own. It also might be more expensive to rent alone, even if you’re renting a smaller apartment. But, if you take control of your finances, you can end up saving money. 

Renting with Roommates 

Co-living is trending right now, and for a good reason. More people means more money to spend, which automatically means more space, even if it is shared. Privacy will be sparse, so if you value your alone time, think about the implications of almost always having people in your home. Depending on how much you’re all willing to compromise, you can get an apartment that is much larger than the one you could get on your own. 

Sharing a place means you will also share the cost of utilities—and maybe even groceries—with your roommates, cutting down on expenses. This is especially helpful with subscription-based services such as internet, cable, or Netflix, where you’d have to pay the same amount even when living alone. Cooking together and splitting the cost of food will also lead to some serious savings if you manage your finances properly

Besides splitting bills, you’ll also be splitting chores. This can be a friction point, so it’s best to set some ground rules and create a schedule to which you all agree. If you do so, some of the painful cleaning and decluttering can actually become fun. 

But remember that roommates can be wildcards – you never know what you’re going to get. If you don’t have any friends or acquaintances who want to join you in sharing a rental, be sure to turn to a trustworthy source to avoid scams. Do your research, ask a lot of questions, and make sure you find a roommate you’re compatible with

Whether you choose to rent alone or with someone else, there are many ways you can save money as a renter. Adopt a frugal lifestyle focused on minimal expenses and follow the golden rule of 50-30-20: 50% of income goes to needs, 30% to wants, and 20% to savings. It may seem complicated at first, but with dedication and experience, you’ll be saving money in no time. 
About the author: Mihaela is a passionate reader and writer, with an affinity for language and linguistics, as well as the latest technological developments. She discovered her passion for real estate at RENTCafé, and you can read more of her articles on their blog.