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5 Ways Freelancers Can Plan for Retirement and Build Wealth

July 31, 2023
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Being a freelancer is about living life on your own terms and embracing the freedom and flexibility that comes with being your own boss. But let’s face it, you may want to retire someday and be your own boss ... on a tropical island. (That’s not just us, right?)

So, how do you get your wealth-building ducks in a row to meet your retirement goals? We sat down with Peter Bourg, a financial advisor with Ashford Advisors, to find out. Here are five tactics that can help you build wealth and save for retirement.

1. IRAs: The "I'm Retiring Awesome!" Fund

You’re probably familiar with 401k plans – and may have had a company-managed 401k at some point in your career. When you work 1099, you can’t contribute to a 401k plan, which is why IRAs are a good option. IRA stands for Individual Retirement Account. As a freelancer, you have a few IRA options at your disposal.

Traditional IRA - allows you to contribute pre-tax dollars, which means you get a tax break now and pay taxes when you withdraw the money in retirement.

Roth IRA - lets you contribute post-tax dollars, so you don't pay taxes when you withdraw the funds later.

SEP IRA – allows you to contribute more than a traditional or Roth IRA, up to 25% of what you made up to a certain amount. Like a traditional IRA, you contribute pre-tax dollars and pay taxes when you withdraw the money in retirement.

IRAs do have maximum contribution amounts and there may also be limitations based on your spouse’s retirement plan. Talk to your CPA regarding the tax implications, then choose the one that suits your financial strategy and start stashing away some cash for your future self. You can find more detailed information at irs.gov.

2. Investments: Making Money Work

Investing can be a good way to build wealth. That said, you might be wondering how a retirement account and an investment account differ.

According to Peter, they have some similarities, but also some differences. “If you invest in Google, for example, you can own Google stock inside of a retirement plan, or you can own Google stock inside of an investment account - there's no difference there. The big difference is retirement accounts are locked up, meaning you can't touch the money without taxes or penalties. Whereas with an investment account, there might be some taxes to pay on gains, but you can access that money very easily.” There are also no contribution limits.

Whether you invest in stocks, bonds, mutual funds, or even exchange-traded funds (ETFs), do some research or seek guidance from a financial advisor to find investments that align with your risk tolerance and financial goals.* Remember, the stock market can be a wild ride, so buckle up!

3. Savings Accounts: Not Just for Rainy Days

Freelancers can be all too familiar with feast-or-famine cycles. During those times when you're feasting on projects and the cash is flowing, it's helpful to save some of that moolah. Create a separate savings account - preferably a high-yield savings account - specifically for your retirement goals and have money transferred there automatically.

If you do have to dip into this account for a rainy day, it’s better than dipping into a retirement account that could have penalties or using a credit card with interest that could add to your debt.

4. Life Insurance: A Whole Life Policy

Life insurance can be more than just death benefit protection for your loved ones—it can also serve as an asset in your retirement planning. Here's how:

Life insurance policies that build cash value, such as whole life or universal life insurance, can be utilized during retirement. As you make premium payments, a portion goes towards the policy's cash value, which grows over time. This cash value can be tapped into later in life to supplement your retirement income or help cover unexpected expenses.1 2

The cash value acts as a growth component within the policy, accumulating tax-deferred over the years.3 It grows at a guaranteed rate set by the insurance company, and in some cases, it can even benefit from dividends or investment options, potentially increasing its value further.4

Before making any decisions, carefully assess your insurance needs, retirement goals, and consult with a financial professional who can guide you through the options available to you.

5. Real Estate: Building a Fortress of Financial Independence.

Investing in real estate can be a lucrative long-term strategy. Whether you’re purchasing rental properties, investing in real estate investment trusts (REITs), or even crowdfunding real estate projects, it's a tangible asset that can appreciate over time and generate passive income, making it a comprehensive addition to your retirement and wealth-building plans.

Heck, even paying your mortgage every month is a way of investing in real estate. If you pay it off, you can live mortgage-free. When it’s time to sell your home, hopefully, you’ll get way more than you paid for it back.

Key Takeaway: Make a Plan

No matter which tactics you use to help you save for retirement, the important thing is to create a plan. This is especially key if you’re not currently doing anything. Hey, we’re all for enjoying the present, but we also want to plan for an incredible future – whether it’s on a tropical island or just enjoying a nap at Noon on a Tuesday in your backyard.  

Need help with the financial fundamentals? Our first article offers up 4 ways freelancers can build a good financial foundation.

Interested in reading more from our financial planning series? Check out our other blogs: 

A Freelancer’s Guide to Riding the Waves of Fluctuating Income 

5 Types of Insurance Freelancers Should Know About 

*All investments contain risk and may lose value. Past performance is not a guarantee of future results.

1 Some whole life policies do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

3 Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

4 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

Peter Bourg is a Registered Representative and Financial Advisor of Park Avenue Securities, LLC (PAS). Securities products/services and advisory services are offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America® (Guardian), New York, NY.  Park Avenue Securities is a wholly owned subsidiary of Guardian. Ashford Advisors is not an independent registered investment advisor nor an affiliate or subsidiary of PAS or Guardian. Ashford Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. CA Insurance License #0I07706; AR Insurance License #10381689. No compensation has been provided by the adviser in connection with this interview. 2023-157636 (Exp. 6/25)

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Being a freelancer is about living life on your own terms and embracing the freedom and flexibility that comes with being your own boss. But let’s face it, you may want to retire someday and be your own boss ... on a tropical island. (That’s not just us, right?)

So, how do you get your wealth-building ducks in a row to meet your retirement goals? We sat down with Peter Bourg, a financial advisor with Ashford Advisors, to find out. Here are five tactics that can help you build wealth and save for retirement.

1. IRAs: The "I'm Retiring Awesome!" Fund

You’re probably familiar with 401k plans – and may have had a company-managed 401k at some point in your career. When you work 1099, you can’t contribute to a 401k plan, which is why IRAs are a good option. IRA stands for Individual Retirement Account. As a freelancer, you have a few IRA options at your disposal.

Traditional IRA - allows you to contribute pre-tax dollars, which means you get a tax break now and pay taxes when you withdraw the money in retirement.

Roth IRA - lets you contribute post-tax dollars, so you don't pay taxes when you withdraw the funds later.

SEP IRA – allows you to contribute more than a traditional or Roth IRA, up to 25% of what you made up to a certain amount. Like a traditional IRA, you contribute pre-tax dollars and pay taxes when you withdraw the money in retirement.

IRAs do have maximum contribution amounts and there may also be limitations based on your spouse’s retirement plan. Talk to your CPA regarding the tax implications, then choose the one that suits your financial strategy and start stashing away some cash for your future self. You can find more detailed information at irs.gov.

2. Investments: Making Money Work

Investing can be a good way to build wealth. That said, you might be wondering how a retirement account and an investment account differ.

According to Peter, they have some similarities, but also some differences. “If you invest in Google, for example, you can own Google stock inside of a retirement plan, or you can own Google stock inside of an investment account - there's no difference there. The big difference is retirement accounts are locked up, meaning you can't touch the money without taxes or penalties. Whereas with an investment account, there might be some taxes to pay on gains, but you can access that money very easily.” There are also no contribution limits.

Whether you invest in stocks, bonds, mutual funds, or even exchange-traded funds (ETFs), do some research or seek guidance from a financial advisor to find investments that align with your risk tolerance and financial goals.* Remember, the stock market can be a wild ride, so buckle up!

3. Savings Accounts: Not Just for Rainy Days

Freelancers can be all too familiar with feast-or-famine cycles. During those times when you're feasting on projects and the cash is flowing, it's helpful to save some of that moolah. Create a separate savings account - preferably a high-yield savings account - specifically for your retirement goals and have money transferred there automatically.

If you do have to dip into this account for a rainy day, it’s better than dipping into a retirement account that could have penalties or using a credit card with interest that could add to your debt.

4. Life Insurance: A Whole Life Policy

Life insurance can be more than just death benefit protection for your loved ones—it can also serve as an asset in your retirement planning. Here's how:

Life insurance policies that build cash value, such as whole life or universal life insurance, can be utilized during retirement. As you make premium payments, a portion goes towards the policy's cash value, which grows over time. This cash value can be tapped into later in life to supplement your retirement income or help cover unexpected expenses.1 2

The cash value acts as a growth component within the policy, accumulating tax-deferred over the years.3 It grows at a guaranteed rate set by the insurance company, and in some cases, it can even benefit from dividends or investment options, potentially increasing its value further.4

Before making any decisions, carefully assess your insurance needs, retirement goals, and consult with a financial professional who can guide you through the options available to you.

5. Real Estate: Building a Fortress of Financial Independence.

Investing in real estate can be a lucrative long-term strategy. Whether you’re purchasing rental properties, investing in real estate investment trusts (REITs), or even crowdfunding real estate projects, it's a tangible asset that can appreciate over time and generate passive income, making it a comprehensive addition to your retirement and wealth-building plans.

Heck, even paying your mortgage every month is a way of investing in real estate. If you pay it off, you can live mortgage-free. When it’s time to sell your home, hopefully, you’ll get way more than you paid for it back.

Key Takeaway: Make a Plan

No matter which tactics you use to help you save for retirement, the important thing is to create a plan. This is especially key if you’re not currently doing anything. Hey, we’re all for enjoying the present, but we also want to plan for an incredible future – whether it’s on a tropical island or just enjoying a nap at Noon on a Tuesday in your backyard.  

Need help with the financial fundamentals? Our first article offers up 4 ways freelancers can build a good financial foundation.

Interested in reading more from our financial planning series? Check out our other blogs: 

A Freelancer’s Guide to Riding the Waves of Fluctuating Income 

5 Types of Insurance Freelancers Should Know About 

*All investments contain risk and may lose value. Past performance is not a guarantee of future results.

1 Some whole life policies do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

3 Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

4 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

Peter Bourg is a Registered Representative and Financial Advisor of Park Avenue Securities, LLC (PAS). Securities products/services and advisory services are offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America® (Guardian), New York, NY.  Park Avenue Securities is a wholly owned subsidiary of Guardian. Ashford Advisors is not an independent registered investment advisor nor an affiliate or subsidiary of PAS or Guardian. Ashford Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. CA Insurance License #0I07706; AR Insurance License #10381689. No compensation has been provided by the adviser in connection with this interview. 2023-157636 (Exp. 6/25)

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