The present times are financially uncertain, but millions of self-employed professionals are facing an even more frightening future. Statistics from the U. S. Small Business Administration show that more than 9 million self-employed professionals have no retirement plans in place. No employer is going to come along and offer a simple solution, but there are lots of ways that professionals can plan for the future -- even when the present looks pretty grim.
Retirement Planning? But, That’s So Far Away
Many self-employed professionals may not even be thinking about planning for retirement -- they’re too busy hunting for jobs and opportunities. Increasing joblessness, growing financial uncertainty and a volatile political climate make it difficult to think beyond today. Tomorrow is a shadowy, uncertain thing that may never even arrive, right?
Wrong. The current financial crisis is just another good reason to start worrying about retirement. Many professionals who were hoping to receive government-sponsored retirement benefits, like Social Security, may find that they are forced to fend for themselves in a matter of years…or months. Self-employed professionals have no employer to provide them with retirement funds, and they shouldn’t count on the benevolence of Big Brother to take care of it for them. Even those who are hoping to sell a successful home-based or self-started business may find themselves in for a rude awakening.
Retirement Options
Self-employed professionals are used to relying on themselves. That has to extend to retirement, too. There are several investment options that independent professionals may use to see to their own future financial safety.
- Individual Retirement Account. IRAs are made for self-employed professionals who are solely responsible for their own financial futures. Different IRAs offer different spending limits for those who want to contribute a portion of their annual earnings to the account. Professionals may put up to 25% of their net income into the account in some cases. The limit may go up with age. Self-employed professionals have the option of contributing a minimum amount of money to the IRA every year as well.
- 401(k). A solo or individual 401(k) allows self-employed professionals who have no employees to save up to 100% of their yearly income in a retirement account. 401(k) accounts have pre-determined monetary limits that cap annual contributions.
- Other savings accounts. There are many different types of savings accounts that allow self-employed professionals to put aside money regularly after a lump sum has been contributed to the account. Annuities, for example, are created with a principle investment that may not be spent until a pre-determined amount of time has passed.
Being self-employed means being independent -- in all ways. Even those who have a business they may potentially sell, or good reason to believe the government will provide for them, would be wise to set some money aside for the future. Working at home at a dream job may seem like a reason to avoid retirement for ever, but eventually some workers find they no longer have the stamina or mental capacity to continue doing what they love. The present is terrifying, and that’s exactly why it’s important to plan for the future.
KC Morgan - KC Morgan has been the featured writer in Self-Employment since 2006, using personal experience to create guides to being self-employed.
Join the Conversation