If you’ve been a freelancer for a few months or a couple of years, planning your retirement might seem entirely crazy. Your solopreneur business might take up so much of your time that thinking years ahead to retirement feels unnecessary. But, thinking about your independent contractor retirement options now covers many concerns about keeping your business solvent right now. Preserving your money preserves your business, too.
Of course, if your retirement is right around the bend, you definitely need to focus on end-of-work issues now. You don’t want that upcoming bend transforming into a vicious curve. Whether you’re retiring now or 40 years from now, we all have something past retirees only dreamed of: the internet! There’s a triple-layer retirement-party cake of online information at your fingertips, describing exactly what to do before you leave your job. You don’t even need to leave your house. The Wall Street Journal, for instance, compiled a number of online tools for retirement — like lifestyle planning, estate planning and budgeting — with summaries for each.
Use the Proper Retirement Investment Tools
Speaking of budgeting, you’ll end up with a mere handful of coins in a loudly rattling piggy bank if you leave your job without putting strong investment and cash consciousness in action. Take the time to sort through the available independent contractor retirement options, including investment tools, like a simple IRA that uses pretax dollars, SEP IRAs with high contribution limits and other types of IRAs (Roth, for instance). The right choice entirely depends on your current financial situation.
But even the most shrewd of investments can shatter if you go crazy with your credit cards. Credit can be the lifeblood of a business if you have capital investment needs or seasonal fluctuations in income. There are some obvious choices, like paying your balance in full and not taking cash advances, that will keep your credit clear, but make sure you keep in mind the more subtle credit dos and don’ts.
Study up on Taxes and Education
Being tax savvy is also a way to save. You need to understand the self-employment tax (i.e., pay your quarterly taxes), and your corporate structure (for instance, choosing between a sole proprietorship or an S corporation) can make a big impact on your taxes. Investigate — you may need an accountant to help — the range of business deductions that can save you the most in the long run. The perils of tax ignorance are many; education is your best defense.
If you’re a happy parent helping your kids with college, there are some higher education investment vehicles that can help everyone motor along. Funding tools, like 529 Plans and Coverdell Accounts, come with varying tax and income benefits; though, as always, the devil’s in the details. Certain tax credits are available once your well-scrubbed progeny begin college and you grapple with the pleasures of tuition and expenses.
Aging is often accompanied by increasing health concerns, as well. You should use some of the financial strategies outlined here to include solid coverage for your health care. At this point, there’s a long-standing government program, Medicare, that offers a broad range of medical benefits for those older than 65.
Clearly, you can see there’s a considerable range of independent contractor retirement options, but you won’t taste the gravy unless it’s heated: Check ’em out! Some are only applicable for certain businesses, and some are only suited for certain stages of your business. But by investigating and understanding your options, you can apply each where and when they’re relevant. Stay secure now, and bask in the benefits later.