Corporate America is still in hiring mode, as evidenced by the strong June Jobs number. Nevertheless, the secular shift to a ‘gig’ or freelance economy remains intact with more people than ever working for themselves as Uber drivers or Airbnb owners. And all those independent contractors better not forget to fund their retirement accounts, said Ed Slott, founder of Ed Slott and Company. ‘You’re on your own so it’s up to you to start saving for your retirement,’ said Slott. ‘No one is else is doing that for you.’ The U.S. nonfarm payrolls report showed that 287,000 jobs were added in June, well above economists’ expectations of 175,000. Roth said freelancers should start with a simple Roth IRA with a $5,500 annual contribution. Those age 50 or over can add the catch-up contribution or $1,000, for a total of $6,500. Married freelancers can add a spousal Roth IRA contribution as well. Slott recommended self-employed people ‘contribute off the top’ before the money is spent. In his view, the best move is to put retirement savings on auto-pilot with automatic withdrawals as part of a budget. ‘You have to be disciplined. Every time you get a paycheck, you need to take a slice off immediately and put it away for retirement,’ said Slott. And the bigger the paycheck, the bigger the contribution. Slott said once the small business gains traction, the owner can contribute more with a SEP IRA or Solo-401(k) to the tune of $53,000, or $59,000, if age 50 or over. Those working full or part time in addition to their freelance gig can also make a SEP IRA contribution in addition to their 401(k) and a Roth IRA contribution too. And don’t forget to get the company match from your employer, said Slott. ‘If you can do more than the simple Roth, you can set up a SEP or even a solo 401(k) where you can put lots more money if you are making more,’ said Slott. Finally, Slott said it is of the utmost importance for solo-practitioners to keep careful track of income and expenses. They need to report wages and self-employment income to qualify for making retirement plan contributions and for Social Security credit. ‘You are the HR department. You are the payroll department. You are everything so you have to keep good records,’ said Slott.
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