Here’s how a new law can help freelancers save for retirement

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This law can help you save money for your future.


the main points

  • The Secure 2.0 Act aims to help everyone save more for their retirement.
  • One provision, called Saver’s Match, can be particularly beneficial to the self-employed.
  • Discover the tax advantage account that best suits your needs, whatever your business situation.

More and more people are self-employed or self-employed these days, which brings many advantages in terms of flexibility and independence. But there are downsides too. For example, it may be difficult to save money as you get older. A recent Pew Charitable Trusts survey of non-traditional workers showed that about half were not confident they would have a comfortable retirement.

This is in part because the onus is on you, not your employer, to organize a retirement plan. Additionally, freelancers’ income streams aren’t always regular, so it can be difficult to juggle your contributions. If these scenarios ring any bells for you, it’s worth knowing you can access federal aid, now and in the future.

The new law helps everyone build retirement savings, including the freelancers

The Secure 2.0 Act was signed into law at the end of last year. It’s a broad retirement package that will affect nearly every American. The idea is to encourage people to save more as they get older. One aspect of the new law, called the Saver’s Match, could make a huge difference for freelancers.

The match replaces the existing saver’s credit and won’t go into effect until 2027. But when it does, the government will make a 50% match on up to $2,000 of the money you contribute to your retirement account. This means that low-income self-employed workers can receive up to $1,000 toward their retirement each year.

The match starts phasing out once you reach a certain income level. For example, subscribers who earn $41,000 or less can get the full match while those who earn up to $71,000 will only get some money. The following are the interim income categories for the savings match:

  • Between $20,500 and $35,500 for single taxpayers filing separately for married couples
  • Between $30,750 and $53,250 for home registration employers
  • Between $41,000 and $71,000 for joint files

The government will match contributions to Individual Retirement Accounts (IRAs) and ABLE accounts. If you are not self-employed, Saver Match also applies to employer retirement plans. It is important to note that the money will be deposited directly into your retirement account, and will not take the form of a tax credit.

Start planning for retirement today

You don’t have to wait until 2027 to start building your retirement savings. The temptation to put it off is understandable, especially since retirement savings often falls into the “important, but not urgent” category. Unfortunately, whether it’s figuring out your health insurance to plan for your retirement, your employer won’t do it for you.

Plus, the earlier you start saving for your retirement, the better. The power of compound interest means that even five or 10 years can make a huge difference to your nest egg. Although you likely have many other demands on your money and bank account balance, your future self will thank you.

If you don’t know where to start, a good place is to see what type of retirement account might best suit your needs. There are a number of options, including IRAs, Roth IRAs, Solo 401(k)s, SEP IRAs, and SIMPLE IRAs. They are all tax-advantaged accounts, which give you tax advantages in different ways. Check out our guide to Self-employed retirement accounts More information on each one.

Once you know what type of account you’ll be using, take a look at your budget and see how much the contribution is realistic. It’s okay if you decide to start small and work your way up. The important thing is to start somewhere. If you are able to automate your contributions, so much the better. This means that you are less likely to put it off or forget about it.

It’s also worth looking to see if your current saver’s balance—which you’ll be redeeming for your new savings match—can help you now. It’s a non-refundable tax credit, so it can reduce the tax you pay to zero but won’t give you a deduction. Depending on your earnings, you may be eligible for a 50%, 20%, or 10% tax credit on the first $2,000 you put into your retirement.

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If you’re not as on top of your retirement savings as you’d like, you’re not alone, especially if you’re a freelancer. Discover the tax advantages of saving for old age, and the path that might benefit you the most. If you can qualify for Saver Credit or Saver Match, so much the better.

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