We all want to retire someday, right? Investing and planning for the future is important, and thanks to our friend compounding interest, the earlier you get started, the better due! Freelancers and self-employed people are responsible for being their own retirement calculator. When it comes to retirement contributions, getting started is the hardest part. It’s not as intimidating it may seem. And there are ways to make it easy — even automatic.
Let’s start with the basics.
Can I save for retirement as a freelancer?
Of course. To begin making retirement contributions, you’ll need to open an individual retirement account or an IRA. There are two primary kinds of IRA accounts: traditional and Roth.
With a Roth IRA, you contribute after-tax dollars and your money grows tax-free. You can make withdrawals after age 59.5 generally tax and penalty free. There are also lower penalties on early withdrawals as compared to Traditional IRAs.
With a Traditional IRA, you contribute money pre or post tax, and your money grows tax-deferred. Withdrawals are taxed as current income after age 59.5.
What does a retirement plan mean?
Great question. When you contribute to your retirement, the money is invested and grows over time. There are different types of ‘plans’ based on various factors including your risk appetite, when you’d like to retire, and how much you’d like to retire with. You can choose to invest in high risk, moderate, and low risk plans.
Higher risk plans typically have a higher percentage of stocks over bonds. Lower risk plans typically have more bonds than stocks. It’s important to know how large of a return you would like to have and balance that with how much money you’re willing to risk. It’s a personal choice and may change over time.
How much can I contribute to retirement?
If you’re under the age of 50, you can contribute up to $6,000 to your IRA in 2022. If you’re over 50, you can contribute $7,000 per year.
How much can I contribute to a ROTH IRA? How much can I contribute to a Traditional IRA? The number is exactly the same.
Okay, that makes sense. So how can I start saving for retirement?
At Catch, we have different retirement plans to choose from. When you’re setting up your account, pick your plan, and then simply automate a percentage of your income to be routed to your plan. Money can be invested every time you get paid or when you earn from a specific job.
Setting aside for retirement (up to $10,000) is free with Catch’s Personal Payroll. Let us take care of the essentials for your retirement contributions, so you can get back to why you got into freelancing in the first place.
For full details on Catch’s retirement plans, pricing, and disclosures, visit our legal page.