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SAVING FOR RETIREMENT IS HARD!

· · 78 Comments

By Craig Erwin, Ph.D.

Saving for retirement is hard, especially in the US. Governments in other countries frequently strive to foster a culture of savings over debt.  They use government programs, incentives, and tax law to do so.  The US requires all who are employed to pay a Social Security tax, which ensures that workers are able to receive regular payments in retirement.  The US also encourages employees to save in an array of IRS sanctioned retirement savings programs such as 401(k)s, 403(b)s, SEPs, and IRAs. Although these programs can be great ways to save for retirement, one of the few programs suitable for part-time employees is the IRA (which is not employer-sponsored) because the other programs tend to be administered by employers and business owners to full-time employees. Unfortunately, far too few people are eligible for some of these savings programs because the programs must be administered by employers and provided to employees.  Most of the millions of people who work part-time or are working for minimum wage are not eligible for employer-sponsored retirement savings plans.

The Gig economy makes saving money for retirement even trickier (and less likely for many people) because it leaves a wide swath of the American population with no formal, employer-sponsored retirement savings vehicle.  Many employed in the Gig economy, don’t have benefits of any kind (including health care).   Why?  Those who work for a company such as Uber,  Lyft, or Doordash, are treated as freelancers (or independent contractors) by their employers (who don’t provide benefits). If you throw in part-time employees, there are a great number of working people who receive few or no employee benefits, including retirement savings plans. 

What can you do to save money for retirement if you don’t work for an employer who offers a retirement savings plan?  Obviously, you must look out for yourself.  One option is to seek employment with an organization that has a retirement savings plan.  But, if you work as an independent contractor or free lancer, or you are self-employed, your best option is likely to open an Individual Retirement Account (IRA) on your own. You have several choices: a traditional IRA, a Roth IRA, a SIMPLE IRA, or a Simplified Employee Pension (SEP) IRA.  Click on this link for information on different types of IRAs. TYPES OF IRAs

https://www.nerdwallet.com/article/investing/types-of-iras#:~:text=7%20Types%20of%20IRAs%3A%20Find%20the%20One%20for,for%20simplified%20employee%20pension.%20…%20More%20items…%20You could also open a Solo 401(k).  But first you need to do your homework to figure out which is best for you.

For more details on these options visit RETIREMENT SAVINGS OPTIONS https://due.com/blog/3-retirement-savings-options-self-employed/#:~:text=%203%20Retirement%20Savings%20Options%20for%20the%20Self,401K%20for%20Better%20Retirement%20Savings%20Options%20More%20

Whichever type of retirement savings vehicle you decide to use, be sure to set up a way to regularly contribute to the plan.  If possible, have money taken out of each paycheck automatically to fund your plan to mimic employer savings plans.

Americans are notorious for failing to save money. But you can buck the trend.  And it’s critical that you do.  Whether you work for a large corporation with a great 401(k) plan or you are a freelancer, you must do what is necessary to ensure that you can retire someday.  Don’t bet that Social Security benefits won’t be reduced (not that they provide enough to live on anyway).  It is no secret that the US federal government is deep in debt and sinks deeper in debt every day; it may have no choice but to cut Social Security benefits.  So, research your options and then get started with the best automatic retirement savings account available to you.  It could make the difference between a comfortable retirement and no retirement at all.

For information on a great way to start building wealth no matter which of the above savings vehicles you use, visit DOLLAR-COST AVERAGING https://womenretire.com/the-best-way-for-most-of-us-to-accumulate-wealth-dollar-cost-averaging/

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