A gig worker’s guide to retirement

Working in the gig economy means retirement is in your own hands. Learn how to start and contribute to your retirement fund.

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Making an income as
a freelancer in the gig economy
MAKING THE FUTURE A PRIORITY
HOW TO SAVE FOR RETIREMENT AS A FREELANCER

takes determination and creativity.

Managing that income
takes those skills and more.

You might be freelancing

to earn a little extra
on top of your full-time job,

working multiple part time jobs,

or taking on side gigs

as you get your own passion
project or business off the ground.

At first, it might be tough just
to make ends meet each month.
BUDGET

So, saving for retirement might seem
like even more of a challenge.
RETIREMENT
ADD FUNDS

You might be tempted to put off saving

until you’re bringing
in a steadier income.

Or you might be planning
to rely on social security,

but that might not be enough
to support you in the future.

So, setting up a retirement account
RETIREMENT PLANS
SET UP AN IRA TODAY!
TRADITIONAL IRA ROTH IRA

and contributing as much as possible,

even if you’re just
starting out, is important.

That’s because the earlier you start,
RETIREMENT ACCOUNT
ADD FUNDS

the longer your money has to
potentially grow before you retire.

Think about it
as paying yourself first.

It’s one more way
that you’re taking care of you –

and your dreams for the future.

So how do you save
when you’re on a tight budget

and your freelance income fluctuates?

After all, there might be
months when work is slow –
MAY

and months when business is booming.
JUNE

One solution is to think about
your monthly retirement contribution

as a percentage of your income.
BUDGET
RETIREMENT
RENT
UTILITIES
INSURANCE

When you earn more,
you’ll put away more,

and when you earn less,
you can put away less.

That way your retirement contribution
won’t overwhelm your budget.

Start by saving five
percent of your income.
5%

When you start earning more,
set a goal to save more,
10%

moving up to ten or even
twenty percent of your income.

Start now.
INCOME RETIREMENT

If you make saving
for retirement a priority,

you’ll set yourself up
for a better future.

BETTER MONEY HABITS
POWERED BY BANK OF AMERICA
BETTER MONEY HABITS.COM

RETIREMENT ACCOUNT BASICS
UNDERSTANDING TRADITIONAL AND ROTH IRAS

If you’re just beginning
to save for retirement,

signing up for an IRA
is a good place to start.

“IRA” stands for
“Individual Retirement Account.”
INDIVIDUAL RETIREMENT ACCOUNT

It’s often a first choice
for freelancers and gig workers

who don’t have
an employer-sponsored retirement plan.

You can set one up through
a bank or an investment firm.

With an IRA, the sooner
you start saving regularly,
NOW

the more you give your money
a chance to grow over time.
YEAR 1,2,3,4,5 etc…

The main benefit of an IRA
RETIREMENT ACCOUNT
ADD FUNDS
WITHDRAW FUNDS

is that it gives you tax incentives
to save for the future:

There are tax advantages
that can save you money
TAX ADVANTAGES

and encourage you to put money in,

and tax penalties to discourage you
from taking money out too soon.
TAX PENALTIES

The two most common types of IRAs
are traditional and Roth IRAs.
TRADITIONAL IRA
ROTH IRA

With both types of IRAs,
CONTRIBUTION WITHDRAWL

you won’t pay taxes as
the money grows in the account,
WON’T PAY TAXES

but the specific tax advantages
are slightly different:
TAX ADVANTAGES

A traditional IRA
TRADITIONAL IRA
CONTRIBUTIONS TAX-DEDUCTIBLE

allows you to make contributions
that may be tax deductible –
CONTRIBUTION

and any earnings
you receive are tax-deferred.
EARNINGS TAX DEFERRED
TAXED UPON WITHDRAWL

That means you generally won’t
have to pay federal income taxes
WON’T PAY TAXES

until you withdraw money from
the account later, in retirement.
WITHDRAWAL

With a Roth IRA,
ROTH IRA
CONTRIBUTION

you pay income tax before
you contribute to your account,
CONTRIBUTIONS AFTER TAX

but you typically won’t have
to pay federal income tax again
EARNINGS FEDERAL TAX FREE
WON’T PAY TAXES

when you make
withdrawals in retirement.
WITHDRAWL

So, a traditional IRA
can give you the benefit
TRADITIONAL IRA
PAY LESS TAXES NOW

of paying less in income taxes now,

while a Roth IRA gives
you the potential benefit
ROTH IRA
PAY LESS TAXES LATER

of not having to pay as much
in taxes later during retirement.

You can start withdrawing
from an IRA without penalties

at the age of 59 and a half.
WITHDRAWAL AT 59 1/2

You generally want to avoid
taking money out before then

if at all possible.

That’s because
you may have to pay taxes

plus, an additional 10% penalty tax

on early withdrawals –

though there are
a few exceptions to these rules.

And both accounts have annual maximums
to the amount you can contribute.
TRADITIONAL IRA
ROTH IRA
$5,500 ACROSS ALL IRA ACCOUNTS
2017 MAXIMUM CONTRIBUTION

You can view this max as a goal:

try to save enough money
to reach it every year.
YEAR 1

And when you find that
you’re easily reaching that goal,
YEAR 2

then it might be time to think about
adding another retirement account
YEAR 3

with a higher contribution maximum.

BETTER MONEY HABITS
POWERED BY BANK OF AMERICA
BETTER MONEY HABITS.COM

ACCOUNTS FOR ESTABLISHED FREELANCERS
SAVING MORE WITH SEP IRAS
AND SOLO 401(K)S

If you find
that you’re easily maxing out

your traditional or Roth IRA,
starting a SEP or Solo 401(k)

might be the next step
to saving even more.

SEP IRAs and Solo 401(k)s
are two retirement account options

that are available to sole proprietors,
independent contractors,
SOLE PROPRIETORS
INDEPENDENT CONTRACTOS

and small businesses.
SMALL BUSINESSES

These are specific terms the IRS uses,

but essentially,
if you’re generating a lot of income

with your freelance work
or are providing a service for a client

but aren’t an employee
you might qualify.

With both types of accounts
you can generally put away

nearly ten times more
than you can with a traditional IRA.
TRADITIONAL IRA
SEP IRA/SOLO 401(K)S

A SEP IRA
works a lot like a traditional IRA:
SEP IRA

you may be able to deduct
your contribution
CONTRIBUTIONS TAX-DEDUCTIBLE

as a business expense
on your tax return,
CONTRIBUTION
EARNINGS TAX-DEFERRED
TAXED UPON WITHDRAWL

and your earnings are tax deferred,

meaning you generally won’t have
to pay federal income taxes on it
WON’T PAY TAXES

until you withdraw it
later in retirement.
WITHDRAWL

A solo 401(k) is a bit more complex,

requiring more maintenance
and paperwork than a SEP.

So you’ll probably want to work
with a professional to set it up.

A solo 401(k) can give you
a bit more flexibility than a SEP IRA
SOLO 401(K)

because you can choose to make
traditional or Roth contributions.
CONTRIBUTIONS
TRADITIONAL BEFORE-TAX/ROTH AFTER-TAX

And, in certain circumstances,

you can borrow money
from your solo 401(k)

for large expenses
like a down payment on a home
SOLD!
FOR SALE

or a medical emergency—

though doing so is complicated
and best thought of as a back-up plan
THERE CAN BE ADVERSE TAX AND OTHER CONSEQUENCES
ASSOCIATED WITH TAKING A LOAN FROM A SOLO 401(K)

as there can be
negative consequences.

Like other retirement accounts,
SOLO 401(K)
TAX ADVANTAGES

your money has the potential
to grow with tax advantages.

And, you generally want to avoid

withdrawing money
from these accounts early:

before you’re 59 and a half.

Doing so could mean
having to pay taxes

plus an additional 10% penalty tax
on what you take out.

It’s also important to note
that if you plan to hire employees,

the rules around SEP IRAs
and Solo 401(k)s

will require you
to make changes to your plan.

Talk with a professional to discuss

what options might work for you
and your growing business.

To learn more,
about how to save smart with
BUDGET

or without a steady income,

check out the retirement page
on Better Money Habits.
BANK OF AMERICA BETTER MONEY HABITS

BETTER MONEY HABITS
POWERED BY BANK OF AMERICA
BETTER MONEY HABITS.COM

Making an income as
a freelancer in the gig economy
MAKING THE FUTURE A PRIORITY
HOW TO SAVE FOR RETIREMENT AS A FREELANCER

takes determination and creativity.

Managing that income
takes those skills and more.

You might be freelancing

to earn a little extra
on top of your full-time job,

working multiple part time jobs,

or taking on side gigs

as you get your own passion
project or business off the ground.

At first, it might be tough just
to make ends meet each month.
BUDGET

So, saving for retirement might seem
like even more of a challenge.
RETIREMENT
ADD FUNDS

You might be tempted to put off saving

until you’re bringing
in a steadier income.

Or you might be planning
to rely on social security,

but that might not be enough
to support you in the future.

So, setting up a retirement account
RETIREMENT PLANS
SET UP AN IRA TODAY!
TRADITIONAL IRA ROTH IRA

and contributing as much as possible,

even if you’re just
starting out, is important.

That’s because the earlier you start,
RETIREMENT ACCOUNT
ADD FUNDS

the longer your money has to
potentially grow before you retire.

Think about it
as paying yourself first.

It’s one more way
that you’re taking care of you –

and your dreams for the future.

So how do you save
when you’re on a tight budget

and your freelance income fluctuates?

After all, there might be
months when work is slow –
MAY

and months when business is booming.
JUNE

One solution is to think about
your monthly retirement contribution

as a percentage of your income.
BUDGET
RETIREMENT
RENT
UTILITIES
INSURANCE

When you earn more,
you’ll put away more,

and when you earn less,
you can put away less.

That way your retirement contribution
won’t overwhelm your budget.

Start by saving five
percent of your income.
5%

When you start earning more,
set a goal to save more,
10%

moving up to ten or even
twenty percent of your income.

Start now.
INCOME RETIREMENT

If you make saving
for retirement a priority,

you’ll set yourself up
for a better future.

BETTER MONEY HABITS
POWERED BY BANK OF AMERICA
BETTER MONEY HABITS.COM

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