Expense Management7 min read

Retirement Planning for Gig Workers: Start Saving Today

No employer 401k? No problem. Learn about retirement savings options available to self-employed and gig workers.

MT

Michael Torres

Financial Advisor · June 1, 2024

Retirement Without an Employer Plan

As a gig worker, you're responsible for your own retirement. The good news? You have excellent options.

Retirement Account Options

Traditional IRA

  • Contribution limit: $7,000 (2024)
  • Tax-deductible contributions
  • Taxes paid on withdrawal
  • Available to everyone

    • Roth IRA

  • Contribution limit: $7,000 (2024)
  • After-tax contributions
  • Tax-free withdrawals
  • Income limits apply

    • SEP IRA

  • Contribution limit: Up to 25% of net earnings (max $69,000)
  • Easy to set up
  • Flexible contributions
  • Great for high earners

    • Solo 401(k)

  • Contribution limit: $23,000 employee + 25% employer (max $69,000)
  • Highest contribution potential
  • More paperwork
  • Can include Roth option

    • Choosing the Right Account

    Just starting out?

    → Start with Roth IRA

    Earning $50,000+?

    → Consider SEP IRA

    Want maximum contributions?

    → Solo 401(k) offers most flexibility

    Already have IRA?

    → Add SEP or Solo 401(k)

    How Much to Save

    Guidelines:

  • Minimum: 10-15% of income
  • Ideal: 20-25% of income
  • Catch-up: More if starting late

    • The Power of Compound Growth:

  • $500/month for 30 years at 7% = $566,000
  • Starting 10 years earlier doubles this

    • Tax Benefits

    Traditional Accounts:

  • Reduce current taxable income
  • Pay taxes in retirement
  • Good if you expect lower retirement tax bracket

    • Roth Accounts:

  • No current deduction
  • Tax-free growth and withdrawals
  • Good if you expect higher retirement tax bracket

    • Dealing with Variable Income

    Strategies:

  • Save percentage of each payment
  • Catch up in good months
  • SEP IRA allows flexible contributions
  • Automate when possible

    • Getting Started

  • Open an IRA (takes 15 minutes online)
  • Set up automatic contributions
  • Choose simple index funds
  • Increase contributions over time

    • Common Mistakes

  • Waiting to start
  • Not taking tax deductions
  • Cashing out when changing situations
  • Not increasing contributions

    • Track your income with GigTracker to better plan your retirement contributions.

    Tags

    #retirement#IRA#401k#savings#financial planning

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