Posts Tagged ‘retirement’

Freelance Writers *Can* Retire: 4 Simple Saving Steps

Posted in Blog on April 9th, 2014 by Carol Tice – 49 Comments

Freelance writer saves for retirementBy Abby Hayes

Are you saving for retirement?

Without employer matches and helpful HR departments to rely on, we freelance writers are on our own for retirement planning.

No matter what your personal situation looks like, a smart freelancer needs to plan for retirement just like we plan for taxes, marketing, and other business-related costs.

With these steps, you’ll be well on your way to saving what you need for retirement. And that tax bill may be smaller, too.

1. Set goals by age

Instead of setting a seemingly impossible end goal for your retirement savings, focus on reaching smaller goals by a certain age. Fidelity suggests saving 1X your average annual income by the age of 35, 3X your salary by 45, and 4X your salary by 55.

Breaking down your goals this way means you’re more likely to stay on track.

2. Use the right account

Many freelancers mistakenly think that their best retirement savings option is a traditional or Roth IRA with a low $5,500-$6,500 contribution limit. But, actually, there are much better options around for US-based and US-expat freelancers, including the following:

  • Solo 401(k): Choose tax savings now or later with both traditional and Roth options. A traditional IRA lets you tax-shelter money now, where a Roth will let you withdraw it tax-free at retirement. Limits are subject to change, but in 2014 you can contribute up to $17,500 (plus an extra $5,500 for those 50 and older) as an “employee,” and then add up to 25 percent of your net self-employment income up to an overall limit of $52,000, not including over-50 “catch-up” contributions.
  • SEP-IRA: In this more streamlined account, you can save up to 25 percent of your net self-employment earnings, up to an overall limit of $52,000 in 2014.
  • SIMPLE IRA: A great option for low-to-middle earning freelancers, the SIMPLE IRA lets you set aside up to $12,000 (plus an extra $2,500 for those 50 and older) in 2014. Plus, your business will add either 2 percent of your total income or a 3 percent matching contribution.

Any of these options gives you the flexibility to save much more money in years where you earn more, so you can reach your retirement goals more quickly. And if you’re in the UK, you have the option of saving in a personal pension, which offers tax relief in the form of bonus savings on contributions up to £50,000 for the 2013-14 tax year.

3. Set monthly goals

There are two ways to set monthly retirement savings goals: by dollar amount and by percentage.

If you have a fairly steady freelancing income, you can set a dollar amount goal – whether that’s $50 per month or $500 per month. In this case, set up an automatic monthly transfer to have the money wired from your checking account to your retirement savings account monthly. That way, you won’t be tempted to spend it!

But if you’re like many freelancers, your income is a bit of a roller coaster. In this case, consider setting a percentage-based goal – like 5-20 percent of your income. Then, get in the habit of automatically transferring that percentage of every single payment you get into your retirement savings account. Again, when you build this habit, you won’t be tempted to spend your retirement savings.

4. Kick in additional year-end contributions

Retirement savings contributions are a great way to save on taxes for both US and UK freelancers. If you find that you’ve got some money lying around at the end of the year, consider kicking some of it into your retirement fund.

In the US, the additional tax savings could mean that you write Uncle Sam a much smaller end-of-year tax payment. In the UK, the more you max out your personal pension contributions for the year, the more tax relief will grow your retirement savings for you.

Abby Hayes blogs about the intersection of freelancing and money at Finance for Freelance, and is the author of 47 Money Saving Tax Deductions for Freelancers, a guide to help freelancers squeeze out more savings at tax time.

7 Ways a Freelance Writer Can Create Retirement Income

Posted in Blog on April 4th, 2012 by Carol Tice – 35 Comments

Do you worry about whether you’ll ever be able to retire from freelance writing?

I got this question from a reader recently:

After a 20+ year career in nonprofit fundraising I’ve been consulting in the field for the past six years and really focusing on writing for them for the past two. So far, so good.

On a recent “weekend retreat” with my wife, we were talking about the business’ future and how when I go, it goes.

So having “the end in mind,” what’s the end game in freelance copywriting? How do you create something so that when it’s time to “fade into the sunset” there may be something to offer someone to buy as a result of my hard work?

Thanks — Matt.

There are a few ways freelance writers can get themselves in a position to retire, Matt:

  1. Create your own ebooks. If you can create ebooks over the years, they could sell for you more or less on autopilot, through word of mouth from people who’ve already bought them, and continue to earn for you. I’m just getting started on this myself with the one ebook I have out, but I’m hoping to create a whole list of ebooks with writing-biz basics that can keep earning for me in future.
  2. Create your own e-courses. With Webinar and video technology where it’s at today, it’s not hard to create courses that can keep on teaching for you and bringing in revenue, long after you’ve stopped actively teaching. All the live events I create for Freelance Writers Den fall into this category.
  3. Create a blog you can sell. Some blogs offer so much valuable information to readers that they eventually grow a big enough audience to attract a company that wants to buy the blog outright. Examples I know offhand include the finance blogs Mint.com (which sold for a reported $170 million) and Get Rich Slowly, as well as Freelance Writing Gigs in my own writing-advice niche. The key here is that the blog not be a cult of personality that’s all about you, but about a topic of high interest to a broad audience, where a buyer could hire other experts in your industry to run it after you depart.
  4. Create a Web-based service business you can sell.  Sometimes, in the course of pursuing your writing career, you get an idea for a related business you could start. That’s what happened to Peter Shankman with Help a Reporter Out — and it became a smash hit. Ad revenue rose to a reported $1 million a year. It was sold to Vocus in 2010.
  5. Write direct mail copy. In some direct mail writing scenarios, the writer earns a royalty on sales made through the copy they wrote. I don’t have any of these gigs lined up, but I gather some of the biggest copywriters have created ongoing revenue streams this way.
  6. Write a smash-hit, evergreen business or how-to book. I’m sure the authors of perennial business besteller The 1-Minute Manager don’t worry about whether they can retire, for instance. If you have nonpareil information that could keep selling for years, write that book proposal and start pitching it around.
  7. Sock money away and/or live on the cheap. Any way you slice it, freelancers are really just like employees when it comes to retirement. If you save money, you can retire on it. If you don’t, your options are fewer. It’s just that we don’t have easy 401(k) plans set up for us — though our options are growing. If you’re serious about retirement, master the art of living below your means. Look at your expenses and make a commitment to cutting back. Then, start saving money, every month. If you’re young, you can use the magic of compound interest to grow your small savings over time. Even if you’re not, it’s never too late to start saving. Money in the bank gives you the power to say ‘no’ to assignments you don’t want, and to say when you want to call it quits on working. I think too many writers just wring their hands and give up on ever retiring — dooming them to poverty-stricken later years — rather than figuring out how to acquire the habit of saving. Also…not everyone envisions retiring to a 7,000-square foot beach villa and traveling the world.  You may not need $1 million to retire on if you are a simple-living type.

Are you planning to retire? Leave a comment and tell us how you’re making it happen.