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September 27, 2001
Retirement a Worry for Freelancers
by Sherril Steele-Carlin

"President Bush's commission on Social Security reform said ... cuts in benefits may be needed to shore up the retirement system even if private investment accounts are set up." This current news story from Reuters sets the stage for a whole new set of worries for freelancers.

Many freelance contractors simply don't think about pension plans. They pay their quarterly taxes and benefits, and hope that Social Security will be there for them when they retire. Or, they use the ostrich approach; they stick their head in the sand, hoping the problem will disappear. Well, with current budget and economy woes, unfortunately it looks like the problem is going to be with us for quite a while. An article at gives contractors a "Word to the wise: Put the retirement issue front and center."

Luckily, there is good news for freelancers who are worried about income during their golden years. Several pension plans exist for contractors, and there are more being developed every day. The San Jose Business Journal reports "A new retirement savings option has arrived, causing small-business owners, independent contractors and anyone with freelance income to think differently about their IRA choices. Although SEP-IRAs have been considered the best first option for many self-employed individuals, the new Roth IRA created by the Taxpayer Relief Act of 1997 presents another option for eligible individuals."

In an article at CBS MarketWatch, writer Marshall Loeb notes, "If you're self-employed, you can cut your taxes by opening a Keogh Plan account or a Simplified Employee Pension, known as a SEP. Many people are eligible for Keoghs or SEPs but don't know it -- or don't take advantage of this large and liberal tax shelter. You qualify just so long as you work for yourself."

Loeb continues, "You can work full-time, part-time or freelance. You can work at one job for an employer but still contribute your earnings from a second, self-employed moonlighting job. Among those eligible for Keoghs and SEPs are most small business people and many lawyers, doctors, dentists, carpenters, plumbers, actors and directors, freelance writers, waiters, taxi drivers and the like."

Don't rely on your spouse's retirement plan to cover you, too. Even if your spouse has a comprehensive plan, it may not be enough to ensure your retirement income will meet your needs. Most retirement plans for freelancers are tax deductible, or at least tax deferred, up to a certain amount. (Be sure to check with your accountant.) While it may be difficult to find the money to contribute, especially when you're first getting on your feet, experts recommend setting aside a certain amount every month for your future. It may not seem like much now, but it can add up by the time you retire. Loeb says, "Over a period of 20 to 30 years, the compounding of tax-deferred earnings on early contributions can add tens of thousands of dollars to your account." While it's never too late to start your retirement plan, clearly, the earlier you plan for your future, the more of a nest egg you'll have when you retire.

With a little planning now, you'll be able to live the life you love, before and after you retire. Take advantage of the pension plans available for freelancers and small business, and make sure your golden years are truly golden.

For more specific information on setting up a personal pension plan, read the article "Retirement Options for the Self-Employed," by Karen Gray. It offers a variety of self-employment pension plans and information on each.

Sherril Steele-Carlin is a full-time freelance writer from Reno, Nevada. She's published numerous articles in print and online publications. She's also the author of the new e-book
"How to get a Life by Living and Working in a National Park."
"How to Break Into Casino Jobs."
Visit her web site at

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