Exit Strategy: Your Retirement Plan

According to a survey by Freelancer’s Union, 57.3 million Americans, 36% of the workforce, were self-employed in 2017. The self-employed do not receive employer-sponsored benefits, unless they become employers themselves and hire workers. full time. , making employers and employees eligible for sponsored benefits.

Otherwise, the self-employed do not receive any paid sick, vacation or vacation time or retirement benefits or employer-sponsored health insurance. Along with the self-employed, there are millions who work part-time in traditional jobs and also do not receive employer-sponsored benefits.

Consider retirement, one of two benefits that workers can self-fund (along with health insurance). If finances allow you to save money to live when you are too old to work, it would be wise to do so.

Examine your spending patterns. How much are you spending on items you want but don’t need? I don’t recommend that you deny yourself all the gratification — we deserve little luxuries now and then — but some expenses may be cut and those funds redirected to savings.

It is difficult to budget for limited income. Even full-time workers underfund their retirement accounts, despite matching contributions. Wages have been stagnant for 30 years and living expenses are only increasing. Many cannot accumulate savings. Some apply what they can save to buy a home, rather than retire. They take a different view of long-term financial planning.

According to the Economic Policy Institute, the median retirement savings for Americans ages 55-61 was $ 163,577 in 2017. Social Security payments help, but on average they cover only 40% of monthly expenses. As of December 31, 2017, the average monthly payment for 62-year-old retirees is $ 1,112; 66-year-old retirees receive $ 1,383; and at age 66, retirees receive $ 1,578.

The retirement landscape in the United States is an impending national emergency and a national embarrassment. The corporate governance laws enacted during the Reagan, Clinton, and Bush (Jr.) administrations brought us globalization and the transfer of high-paying jobs to other countries and, in doing so, created the crisis. The ability of many citizens to earn a comfortable living through employment in benefit-paying jobs has been destroyed.

The computer age hasn’t done you any favors, either. So now you can play Snapchat on your Android while on break from your $ 12 an hour job. There is technology that has advanced in many fields. But are these advances worth the livelihood of millions of people? That is a question for ethicists.

If possible, open a retirement account. Here are two options for Solopreneurs and part-time employees:

myRA is an initial retirement account created by the Department of the Treasury. There is no charge to open an account and you decide how much to contribute each month. Automatic withdrawal contributions can be made through your bank account or paycheck.

If you change jobs, your myRA account will not be affected. If you withdraw money from the account, there is no financial penalty. myRA is funded with after tax entry. The maximum annual myRA contribution is $ 5,500 and $ 6,500 for those age 50 and older. The maximum amount that can be withheld in a myRA is $ 15,000. Once the $ 15,000 limit has been reached (or earlier, for that matter), the balance can be transferred to a traditional retirement account. https://myra.gov

Self Employed 401 (k) Profit Sharing Plan (401 only)[k]) is financed with before taxes Dollars. You can make contributions as an employer (because you employ yourself) and as an employee (because you are an employee of your sole proprietorship or one-person LLC entity). Using your employer’s hat, a contribution can be up to 25% of annual net profit, or $ 33,000 ($ 39,000 if you are 50 or older) per year. A second contribution of a maximum of $ 18,000 a year ($ 24,000 a year for those over 50) can be made while wearing your employee hat.

Better yet, it is possible to hire your spouse as an employee under this plan and he / she can contribute in the same way as you, which means that your spouse can also contribute up to $ 53,000 ($ 59,000 if he / she is 50 years old or older). by year. Open your Solo 401 (k) account before December 31 and make a tax deductible contribution this year.

Thank you for reading,

Kim