Freelancing offers job freedom and flexibility, and this profession has become a popular way to earn a living. Approximately 57 million Americans have joined this workforce, and these freelancers are faced with many challenges, including saving for retirement. Fortunately, an accountant can help with planning for future financial security. Here are a few ways freelancers can build a nest egg.

How Freelancers Can Save for Retirement

1. Roth IRA

The Roth IRA is a retirement account that many freelancers use. This can be beneficial to people who are working to develop their freelancing career and land into a lower tax bracket. Although Roth IRA contributions don’t lower taxable income, this kind of account offers tax-free withdrawals in retirement. An accountant can help open and fund an IRA until the tax filing deadline in April.

2. SEP IRA

A Simplified Employee Pension (SEP) IRA is another worthwhile consideration for freelancers. It can be funded with up to 25% of a worker’s net self-employment income. If you identify as a business owner, there can be confusion when determining contribution limits. It’s recommended that an accountant determine the ideal amount to put into an SEP IRA.

3. Solo 401(k)

Designed specifically for individuals, a solo 401(k) has a higher savings rate, and it can be funded by an employer and employee. This allows for significant savings since freelancers fulfill both roles. These accounts must be established by the last day of the year for a contribution to count in the same calendar year, and they require additional paperwork to set up.

If you’re working as a freelancer and have yet to start retirement planning, reach out to an accountant at Tudor Wilson & Associates CPAs, LLC, in Honolulu, HI. After completing a personal assessment of your situation, they’ll advise which type of account is best for maximizing your contributions. Call (808) 592-2000 to schedule an appointment, or view their services online.