According to a
survey conducted by the Freelancer's Union, 57.3 million Americans, 36% of the
working population, were self-employed in 2017. The self-employed receive no
employer-sponsored benefits, unless they themselves become employers and hire
full-time workers, making employers and employees eligible for sponsored
benefits.
Otherwise, the
self-employed receive no paid sick, holiday, or vacation time and no employer
co-sponsored health insurance or retirement benefits. Along with the
self-employed are millions who work part-time in traditional employment and
likewise receive no employer-sponsored benefits.
Let's consider
retirement, one of two benefits that workers may self-fund (along with health
insurance). If finances allow you to set aside money to live on when you're too
old to work, you'd be wise to do so.
Examine your
spending patterns. What are you spending on items that you want, but don't
need? I don't recommend that you deny yourself all gratification---we deserve
little luxuries every now and again---but some spending might perhaps be
trimmed and those funds redirected to savings.
Budgeting a limited
income is difficult. Even full-time workers under-fund their retirement
accounts, despite the matching contributions. Wages have stagnated for 30 years
and living expenses only increase. Many are unable to accumulate savings. Some
apply what they're able to save toward buying a home, rather than retirement.
They take a different view of long-range financial planning.
According to the
Economic Policy Institute, the mean retirement savings for Americans age 55 -
61 was $163,577 in 2017. Social Security payments help, but on average cover
only 40% of monthly expenses. As of December 31, 2017, the average monthly
payout for retirees age 62 is $1,112; retirees age 66 receive $1,383; and at
age 66, retirees receive $1,578.
The retirement
picture in the U.S. is a looming national emergency and a national
embarrassment. Corporate governance laws enacted during the administrations of
Reagan, Clinton and Bush (son) brought us globalization and the transfer of
well-paying jobs to other countries and by so doing created the crisis. The
ability of many citizens to earn a comfortable living through employment in
benefits paying jobs has been destroyed.
The computer age
has done no favors, either. So now you can play with Snapchat on your Android
while on break at your $12/hour job. There is technology that's advanced many
fields. But are those advances worth the livelihood of millions? That's a
question for the ethicists.
If possible, please
start a retirement account. Here are two options for Solopreneurs and part-time
employees:
myRA is a starter
retirement account created by the Treasury Department. There's no charge to
open an account and you decide how much to contribute each month. Automatic
withdrawal contributions can be done through your bank account or paycheck.
If you change jobs,
your myRA account isn't affected. If you withdraw money from the account, there
is no financial penalty. myRA is funded with after-tax income.
The maximum annual myRA contribution is $5500 and $6500 for those age 50 or
older. The maximum amount that can be held in a myRA is $15,000. Once the
$15,000 limit has been reached (or before, for that matter), the balance can be
rolled over into a traditional retirement account. https://myra.gov
Self-employed
401(k) profit sharing-plan (Solo 401[k]) is funded with pre-tax dollars.
You can make contributions as both an employer (because you employ yourself)
and as an employee (because you are employed by your sole proprietorship or
single person LLC entity). Wearing your employer hat, one contribution can be
up to 25% of annual net profit, or $33,000 ($39,000 if 50 years or older) per
year. A second contribution of maximum $18,000 annually ($24,000 annually for
those 50 years and older) can be made while wearing your employee hat.
Better still, it's
possible to hire your spouse as an employee under this plan and s/he can
contribute in the same way as you do, meaning that your spouse can also
contribute up to $53,000 ($59,000 if age 50 years or older) per year. Open your
Solo 401(k) account before December 31 and make a tax-deductible contribution
this year.
Thanks for reading,
Kim
Kim L. Clark is an
external strategy and marketing consultant who brings agile skills to the
for-profit and not-for-profit organization leaders with whom she works. Ensure
that your organization achieves its mission-critical goals when you contact Kim
at http://polishedprofessionalsboston.com.
Article Source: https://EzineArticles.com/expert/Kim_L._Clark/647250
