Most gig workers are probably earning just enough to cover their expenses or maybe adding some extra income to their primary job. It appears that some individuals are not contributing sufficient funds, or perhaps none at all, towards their future retirement through Social Security taxes.
Gig workers may face challenges when it comes to retirement if they lack a substantial employment history and haven't made significant contributions to Social Security.
How Can Gig Workers Ensure Enough Retirement Funds?
Many gig workers find it challenging to manage their expenses when their income is inconsistent. Freelancers frequently place more emphasis on their immediate business requirements rather than long-term savings, which can lead to inadequate contributions to Social Security, as stated by Sherman Standberry, a licensed CPA and managing partner at My CPA Coach.
Effective tax planning is crucial for freelancers to avoid unnecessary tax payments, enabling them to allocate a greater portion of their income towards retirement savings.
Many gig workers mistakenly believe that establishing retirement plans is a costly and complex process. There are, however, some affordable and straightforward options available, including SEP IRAs, Solo 401(k)s, and Traditional or Roth IRAs.
These accounts provide tax advantages and allow for larger contributions compared to regular individual retirement accounts.
According to Standberry, certain choices enable independent contractors to make contributions as both employees and employers, resulting in a substantial increase in retirement savings.
In addition, Standberry emphasized the importance of diversifying investments for gig workers to maximize their gains and secure a better retirement.
According to him, consistently saving a portion of one's monthly income for retirement can result in a significant amount of money in the long run.
Gig workers can also consider paying quarterly estimated Social Security taxes based on your income. According to the IRS's quarterly payment schedule, individuals calculate their income for each quarter by subtracting expenses from their earnings.
When freelancers are deciding between paying into Social Security or investing their own money, it's important for them to take a balanced approach. Hakimian emphasized the importance of considering the uncertainty surrounding future Social Security benefits.
Freelancers have the opportunity to take charge of their retirement funds by investing their own money. This allows them to customize their investment strategies to align with their unique financial goals and needs.
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How Much Social Security Benefits Retiree Could Receive Per Month?
According to The Motley Fool, many older adults will depend on Social Security to some extent during their retirement years. An astonishing 88% of retirees rely on their benefits, as revealed by a recent Gallup poll.
Within this group, a significant 60% consider Social Security to be a primary source of income.
Many retirees depend solely on their benefits for income. Even with a significant amount of savings, there is a possibility that your funds may be depleted if you live a long life.
It is important to take steps now to maximize your benefits to secure a better future. Regardless of your financial circumstances, there is a straightforward strategy that could potentially boost the monthly benefits of the average retiree by over $700.
Deciding when to start receiving Social Security benefits is a crucial aspect of planning for retirement.
The age at which you file for benefits can have a direct impact on the amount you receive each month. Additionally, once you file, your benefit amount is generally fixed, with the exception of annual cost-of-living adjustments.
This decision will significantly affect your financial situation for the rest of your life.
Retirement benefits can be accessed as early as age 62. By waiting until your full retirement age, which is age 67 for everyone born in 1960 or later, you will receive 100% of your benefit based on your work history.
By delaying your claim until age 70, you will receive your full benefit along with an additional monthly bonus.
These changes are typically long-lasting and can have an impact. When you decide to claim at age 62, your benefits will be subject to a reduction of up to 30% per month. By waiting until age 70, individuals can receive a significant bonus of at least 24% per month in addition to their full payments.
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