One of the downsides often cited about owning your own business is that you don’t get benefits like a 401k.
It’s recommended by many financial advisors to max out as many retirement accounts as possible each year, and when you’re an employee you can often have the company match your contribution, sometimes doubling the contribution to that account each year.
But solo-creators, freelancers, and artists generally own their own business, so there *isn’t* an employer who has set up that 401k account for them.
So, what to do?
A great, tax-advantaged option is an IRA, or “individual retirement account”.
There are two flavors to consider - a Roth IRA and an SEP IRA.
ROTH IRA accounts are personal investment accounts that let you withdraw money in the future tax free, meaning more of what you put in you get to take out. Right now you can contribute up to $6k a year, as long as you don’t personally make more than $140k, or $208k for married couples.
SEP IRA accounts are Simplified Employee Pension accounts that can be set up by a self-employed individual. You get a tax deduction for the contributions to the account, and the limit is higher - up to 25% of your compensation, or $58,000, whichever is less.
So if you pay yourself $80k, you can put up to $6k in your ROTH IRA, and your company can contribute another $20k to your SEP IRA account, which is above and beyond your salary.
Investing like that can add up quickly over just a few years, and set yourself up for a comfortable retirement, all while enjoying the freedom and control of owning and running your own business along the way.
It’s recommended by many financial advisors to max out as many retirement accounts as possible each year, and when you’re an employee you can often have the company match your contribution, sometimes doubling the contribution to that account each year.
But solo-creators, freelancers, and artists generally own their own business, so there *isn’t* an employer who has set up that 401k account for them.
So, what to do?
A great, tax-advantaged option is an IRA, or “individual retirement account”.
There are two flavors to consider - a Roth IRA and an SEP IRA.
ROTH IRA accounts are personal investment accounts that let you withdraw money in the future tax free, meaning more of what you put in you get to take out. Right now you can contribute up to $6k a year, as long as you don’t personally make more than $140k, or $208k for married couples.
SEP IRA accounts are Simplified Employee Pension accounts that can be set up by a self-employed individual. You get a tax deduction for the contributions to the account, and the limit is higher - up to 25% of your compensation, or $58,000, whichever is less.
So if you pay yourself $80k, you can put up to $6k in your ROTH IRA, and your company can contribute another $20k to your SEP IRA account, which is above and beyond your salary.
Investing like that can add up quickly over just a few years, and set yourself up for a comfortable retirement, all while enjoying the freedom and control of owning and running your own business along the way.
---
Learn the principles and secrets to building a resilient, profitable creative business at daren.blog/build