When it comes to retirement preparation, the tips are usually pretty uniform. Usually, you just commit the maximum amount of money that your employer will match, taking advantage of easy, free money! If you’re a gig worker, you are probably out of luck in this regard. While there isn’t some uniform amount of money you can commit every month, you can still make steady gains in your retirement account! Just like being a gig worker itself, it’ll take some extra structure and discipline. We believe you can do it, and we are here to tell you how:
Open an Account
As a self-employed worker, you can actually open your own 401(k) as a solo participant. This is a good idea if you are planning to eventually take on employees, and supply this benefit for them. Otherwise, you will probably want to just open an IRA. We have some resources for you on which would be best for your given situation, so feel free to read before you decide! These contributions will still be tax-free so long as you do not remove them before you retire.
Set Annual Goals
If you have been a gig worker for a while, you should have a decent idea of what your income will look like on a yearly basis. This can help you set a goal for how much you want to have saved by the end of the year. Doing this will help you with the next step, which is deciding how much of each payment you receive will go to your retirement account. A great way to decide what your goal is, is to figure out what your ideal age of retirement is. Once you have done that, decide how much you want to have saved by the time you get there. For example: If you’re 25, and want to retire by 65 with $500 thousand in the account, you need to be saving $12,500 per year (not including accrued interest).
Pick a Percentage
Since you aren’t dealing with fixed amounts of money each month, percentages are your best friend when it comes to retirement savings. As a gig worker, your income will usually vary throughout the year, so choose a percentage of each payment you receive and set it aside in your retirement account. This will ensure that you aren’t eating up too much of your smaller months’ income, and getting yourself into unnecessary financial pinches. Starting with a smaller goal, like 5%, is a great place to start. Even though it might not meet your average annual goal immediately, don’t be afraid to start small and save more when you are established and making bigger bucks. While it’ll seem like a lot on those big-ticket jobs, you’ll realize how forgiving it is on the small gigs.