Freelancing gives you freedom and flexibility, but it also means you’re in charge of your retirement. Unlike traditional employees with employer-sponsored plans, freelancers must forge their own path to a financially secure retirement. This requires being proactive, understanding your retirement options, and managing your finances wisely. Here are six steps to help you successfully navigate your path to retirement as a freelancer.

Set Clear Retirement Goals

Picture your ideal retirement: where you’ll live, how you’ll spend your time, and what lifestyle you’ll maintain. This vision serves as motivation and helps you plan how to get there. Next, decide when you plan to retire, so you’ll know how much time you have to save and how much money you’ll need. Then, estimate how much income you’ll need by considering your current expenses, healthcare costs, and inflation. Use online retirement calculators to help you through this process.

Explore Retirement Savings Plans

Freelancers have multiple retirement savings options. The solo 401(k), or individual 401(k), allows you to contribute as both employee and employer, offering higher contribution limits and potential tax advantages. The SEP-IRA provides a simple setup with flexible contributions, which is ideal for a freelancer with a fluctuating income. Traditional IRAs offer tax deductions on your contributions, while Roth IRAs provide tax-free withdrawals in retirement.

Create a Retirement Budget

To develop a retirement budget, you must clearly understand your current income and expenses. Use budgeting apps, spreadsheets, or traditional methods to paint a clear picture of your finances and determine how much you can realistically save. Then, automate your savings by setting up recurring transfers to your retirement accounts so your contributions are consistent even if your income isn’t. Scrutinize your spending habits to find ways to free up more money for retirement.

Diversify Your Investments

Don’t put all your eggs in one basket. Spread your retirement investments across different asset classes, such as stocks, bonds, and mutual funds. Consider your risk tolerance, which is how comfortable you are with the possibility of losing money. Younger freelancers may be more comfortable taking on higher-risk investments, while those closer to retirement may prefer to be more conservative. Check your portfolio regularly and shift money as needed to maintain the right balance as time goes on.

Plan for Healthcare Costs

Don’t forget to consider healthcare costs, both now and in the future. Freelancers are responsible for their own health insurance, so consider exploring private plans through the Affordable Care Act marketplace or joining a professional organization that offers group health insurance. Consider long-term care insurance to help with the potential costs of nursing home care or assisted living as you age. If you have a high-deductible health plan, use a health savings account (HSA) for triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

Stay Informed and Seek Advice

Retirement planning is an ongoing process. Keep up with changes in tax laws, retirement plan rules, and investment strategies. Consider consulting a financial advisor to provide personalized guidance, help you create a comprehensive retirement plan, and offer investment advice tailored to your specific needs and goals.

Want to learn more about retirement planning? Reach out today to get expert advice tailored to your needs!