Credit: Alan Cleaver/Flickr
Retirement is a topic that freelancers shy away from. Bring it up with your fellow freelancers and you’ll probably hear at least one person proudly proclaim that they plan to work until the day that they die.
There’s a certain sense among many of us that we actually enjoy what we do. Since we don’t have a boss to drive us crazy, why would we want to ever retire?
That’s all well and good, but it doesn’t mean that there’s not a value in planning for retirement. The simple fact is that none of us know what’s in store for the future and having a little money set aside will make it easier to take a break from freelancing to play with the grand kiddies.
You can also get some benefits in the here and now from saving for retirement ? like a break on your taxes. Why hand a bigger chunk of your income to the IRS than you have to?
Start Thinking About Retirement Now
Whether you’re fresh out of college or a little closer to an age at which you would like to retire, you need to start thinking about retirement today. Nora Dunn, a financial planner turned professional hobo and freelance writer, points out:
Whether you’re a freelancer or not, it pays to think about retirement sooner than later. A small amount of money invested early on in life can grow and compound into a much larger amount of money when you need it. By waiting even 10 years to start saving for retirement, the amount of money you need to save to achieve the same goals can easily triple. Freelancers have the added special consideration of an unsteady (and often unpredictable) income to manage. This makes money management and saving for retirement especially tricky, but not unmanageable.
Retirement planning requires a certain mindset ? just as growing your freelance business does. Dunn suggests thinking about retirement as another financial aspect of your business. You have to plan for business growth, figure out cash flow and get your retirement savings in order in much the same way.
Look to the Pros
Saving for retirement is a fairly simple process. “It’s important to commit a percentage of your earnings to retirement savings. With a variable income though, it requires both discipline and a system,” notes Dunn.
If you systematically put away a portion of your income every month, at some point you’ll have a nice cushion for retirement. Despite the simplicity of the situation, though, it is worthwhile to at least sit down with a financial professional to look at your options. As Dunn says, “Financial planners offer up-to-date knowledge, proven methodologies to help individuals reach their financial goals, and can even provide freelancers a degree of accountability in saving their money.”
While you’re growing your freelance business, you don’t have time to study up on the benefits of all the different retirement accounts out there. Working with a financial planner is one of the easiest ways to get a clear picture of the situation, without spending time that could be better invested in your own business. You will need a financial planner to navigate these sorts of options. Your accountant may be able to show you clearly what retirement account reduces your tax bill the most, but unless he’s also well educated in financial planning, you’ll likely need a little more help.
Freelancers Need Flexibility
More so than many other professionals, freelancers need a lot of flexibility when it comes to retirement planning. A plan that requires saving a sizable amount every month just may not work with the ups and downs of a freelancer’s income. There are savings plans and retirement accounts out there that take this factor into account, letting individuals make decisions like saving a smaller amount every month and then making one large contribution at the end of the year.
Photo credit: Some rights reserved by Alan Cleaver
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