Photo Credit: StartupStockPhotos from Pixabay.
Written By: Alicia Adamczyk.
We're excited to share that we were recently featured in LifeHacker's Two Cents section! The article, How Freelancers Can Save for Retirement Beyond an IRA, was written by Alicia Adamczyk and answers a reader's question on how he can save more for retirement as a freelancer who already maxes out a Roth IRA, but is unable to contribute to a 401(k). Our President, Mychal Eagleson, was quoted and helped Alicia answer his question and provide him with the best options to save for his future. A big thank you to Alicia for including us in this piece!
Now we know what you're probably asking, how does this question about a freelancer relate to you as a teacher?
Well we're glad you asked because we've actually begun to see more teachers take on freelancing jobs to make additional money (or as some call it "a side hussle"). Websites like Upwork and iFreelance have allowed teachers to utilize their knowledge and skill sets, once thought of as mainly applicable to just the classroom, to work on writing, editing, design, and other creative projects for those who need them and are wiling to pay for help. Instead of taking on the hassle of a part-time or summer job, as teacher you can now log-on, sign-on to projects, and get paid as a part-time freelancer. Pretty cool, right?!
But then, that brings us back to the reader's question about how to save some of the money made as a freelancer for retirement. A Roth IRA is almost always a good option for teachers, but if you're already maxing it out what do you do?
Since the pay isn't coming from your district, you can't contribute it to your 403(b). You could try to coordinate a strategy to increase your 403(b) contributions, but it might be tough to determine how much since freelancing gigs can be hit or miss, and you don't want to blow up your budget during a slow month or two.
So, the answer we came to that would work best for the reader, and most teachers in a similar situation, is to use a brokerage account. This type of account allows you to deposit as much or as little money as you'd like, invest it, and typically doesn't tie it up, so if you need to get to it for an emergency, you can. The downside is that unlike the retirement accounts we normally discuss, brokerage accounts don't have a special tax status. That means that income and gains are reported and taxable in the year they happen, but it's still not a bad trade-off, if it allows you to save more for you future.
If you're a teacher who does freelance work on the side or are considering it, we encourage you to take a minute and read the article, as Alicia does a great job explaining all the details. And if you have questions about how a strategy like this will affect your finances or need to figure out what you should do, don't hesitate to reach out to us!