Wise choice of bread
We are in the midst of a major economic shift. Whereas in the past workers could count on maintaining a stable job with a traditional employer for decades, today’s workers have found that they must either pursue careers in various positions or supplement the paltry wages in traditional jobs by doing freelance work. in free time.
While you can make a living (and maybe even pretty good) by working on gigabytes, this kind of work leaves them vulnerable in one very important aspect: retirement planning.
Without the backing of an employer-sponsored retirement account, many workers don’t save enough for their golden years. According to a recent Betterment report, seven in 10 full-time employees say they are not ready to maintain their current lifestyle during retirement, and three in 10 say they do not save money for retirement on a regular basis.
So what should workers do if they don’t want to work for Uber and hire TaskRabbit in their 70s and 80s? Here are five things you can do to save for retirement in the gig economy. (See also: 15 Lucrative Citizen Side Quests)
1. Summarize what you have
Many people do not have a clear idea of how much money they have. And it’s impossible to plan your retirement if you don’t know where you are today. Therefore, any retirement savings should start with what you already have in accounts in your name.
Add up the amount in your checking and savings accounts, any abandoned retirement accounts you may have received in previous traditional jobs, cash if your job relies on tips, or any other financial accounts. The total might be more than you think if you hadn’t recently estimated where you are.
Even if you really have nothing but pocket nap and a couple of blocks in your name, it’s better to know where you are than to act without a clear understanding of your financial reality. (See Also: These 13 Numbers Are Critical To Understanding Your Finances)
2. Open the IRA.
If you do not already have a retirement account to which you can contribute, you need to create one as soon as possible. You can’t save for retirement if you don’t have an account to put money into.
IRAs are specifically designed for individual investors, and you can easily get started with one online. If you have 401 (k) money to roll over, you have more options as some IRAs have a minimum investment amount (usually $ 1,000). If you have less than that to open an account, you can opt for the Roth IRA, as they often don’t have minimums.
The difference between a traditional IRA and a Roth IRA is how taxes are collected. With a traditional IRA, you can fund your account with pre-tax income. In other words, every dollar you invest in an IRA is a dollar that you shouldn’t be reporting as income. However, upon retirement, you will have to pay regular income tax on IRA payments. Roth IRAs are funded with money that is already taxed, so you can receive tax-free payments when you retire.
Many concert workers choose the Roth IRA because their current tax burden is low. If you are looking to earn more over your career, using a Roth IRA for your retirement investment can protect you from the retirement tax inspector.
Whether you choose Roth or a traditional IRA, the annual contribution cap as of 2018 is $ 5,500 for workers under 50 and $ 6,500 for anyone over 50.
3. Avoid small investment fees.
While no investor wants to lose portfolio growth due to fees, it is especially important for giants to choose an asset allocation that minimizes investment fees. This is because gig workers will likely have less money to invest, so every dollar needs to work hard for them.
Investing in index funds is one good way to make sure investment fees don’t take your retirement account life. Index funds are mutual funds that are designed to mimic a specific market index, such as the S&P 500. Since there is no portfolio manager to select investments, there are no management fees for index funds. (See Also: How To Start Investing With Just $ 100)
4. Accept automation
One of the toughest problems with gig work is that your income varies, making it very difficult to plan for monthly contributions of the same amount. This is where technology comes in.
First, set up an automatic transfer of the amount that you will not miss. Whether you can save $ 50 a week or $ 5 a month, a small amount of money sneaking into your IRA gives you a little cushion you don’t need to think about.
From there, consider using a savings app to manage your retirement savings for you. For example, Digit will analyze the inflows and outflows of your checking account and determine the amount that can be safely saved without invoking an overdraft, and will automatically transfer this amount to the savings account. You can then transfer your Digit savings into your retirement account.
5. Invest the money you find
A great way to make sure you are increasing your donation to the maximum each year is to change your attitude towards “money found”. For example, if you got a birthday check from your grandmother, spend only half of it and put the rest in your retirement account. Likewise, if you receive a tax refund (which is slightly less likely if you work with a gigabyte paying quarterly estimated taxes), send at least half of the refund to retirement.
Any concert workers who receive cash frequently can also set their own rules for how money is received. For example, you might decide that every $ 5 you receive should go towards retirement savings. This will help you change the way you think about money and give you the opportunity to increase your retirement savings.
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