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What's the best strategy to save for retirement when you're either working in jobs that don't provide 401k or if you do freelance for your main source of income?
My GF (one day to be wife) is in this situation. She hasn't been the best with money, but I got her on track, most bills paid off, a few bills left (low interest student loan) and got her to start saving. She has almost $3K just in a savings account. She will be a stay at home mom starting in March, but will continue to work her restaurant job a few nights a week and continue with her freelancing. She won't be making a lot of money, I'm projecting $15-20K in 2014. However, I am able to cover all of our monthly bills on my salary, granted leaving me with $0 a the end of the month. So, anything she makes is our savings (aside from the money I contribute to 401K at work). I have an emergency fund of $25K in cash.
So, I'm thinking of getting her to work up her savings to about $5K range. This would be like her personal emergency fund/back up money if for some reason they cut back her schedule and she needs to find another part-time. It can also be used as a fun fund, like if she wants to do something special with the baby.
I'm thinking she probably needs to start an IRA once we get her savings up to $5K or so. But I am afraid to tie up that money, mostly because after this recession and layoffs and not being able to even get a full-time serving job, the uncertainty scares me. Plus she wouldn't be able to contribute a whole lot, but it will be something.
In the end it's all our money. I just like to keep some things separate so she sees how the bills get paid off and how the savings build up. She was not financially savvy at all when we met.
If you're working in a job that doesn't provide 401K, then you do IRA. If you're doing freelance, then you can do a SEP-IRA where you can contribute the lesser of 25% of income or $52,000.
I'd definitely recommend having an emergency fund, but retirement will arrive whether you plan for it or not, and a little bit of money growing for many years will often end up to be more than a lot of money recently invested.
You can consider a Roth IRA where any contributions made are always withdrawn tax free and penalty free....at any time. Only earnings are subjected to tax/penalties if before age 59 1/2. This won't tie up your money in case of an emergency.
What's the best strategy to save for retirement when you're either working in jobs that don't provide 401k or if you do freelance for your main source of income?
My GF (one day to be wife) is in this situation. She hasn't been the best with money, but I got her on track, most bills paid off, a few bills left (low interest student loan) and got her to start saving. She has almost $3K just in a savings account. She will be a stay at home mom starting in March, but will continue to work her restaurant job a few nights a week and continue with her freelancing. She won't be making a lot of money, I'm projecting $15-20K in 2014. However, I am able to cover all of our monthly bills on my salary, granted leaving me with $0 a the end of the month. So, anything she makes is our savings (aside from the money I contribute to 401K at work). I have an emergency fund of $25K in cash.
So, I'm thinking of getting her to work up her savings to about $5K range. This would be like her personal emergency fund/back up money if for some reason they cut back her schedule and she needs to find another part-time. It can also be used as a fun fund, like if she wants to do something special with the baby.
I'm thinking she probably needs to start an IRA once we get her savings up to $5K or so. But I am afraid to tie up that money, mostly because after this recession and layoffs and not being able to even get a full-time serving job, the uncertainty scares me. Plus she wouldn't be able to contribute a whole lot, but it will be something.
In the end it's all our money. I just like to keep some things separate so she sees how the bills get paid off and how the savings build up. She was not financially savvy at all when we met.
6 months of living expenses is a good emergency fund. Beyond that you should be putting into Traditional and Roth IRA's unless you're saving for a car or house.
You should have enough income to be able to save another $5000 over the course of the pregnancy , minus medical bills. What's left after an uncomplicated delivery can go wherever you see fit (retirement,baby's college education, etc.). If you can't save the $5000 minus medical bills, you probably can't afford to have a child yet.
What's the best strategy to save for retirement when you're either working in jobs that don't provide 401k or if you do freelance for your main source of income?
Frankly, I would make it my goal to find a position that offers a 401k and employer matching contributions.
It is incredibly beneficial for your future savings to have this. Should be a requirement.
Frankly, I would make it my goal to find a position that offers a 401k and employer matching contributions.
It is incredibly beneficial for your future savings to have this. Should be a requirement.
It can be argued that the SEP-IRA for freelancers is better than any employer 401k out there. They can potentially stash a lot more than the $17,500/yr 401k federal limit.
All you have to do is open an Individual Retirement Account (IRA) with a mutual fund company or brokerage. I personally recommend a mutual fund company, as brokerages have a way of hitting people with too many fees. If you want access to the money, you can set it up as a Roth IRA. You won't get a tax break up front like you do with a regular IRA or 401K, but you'll be able to take out the contributions without penalty (but not the growth...that is penalized if you take out more than your contributions). Of course, a Roth IRA is a 2 edged sword....if you take out some of yourcontributions, then then you won't have as much for retirement....There is a natural human tendency to put too much emphasis on the present and ignore the long term future consequences of one's behavior...so that's something to watch out for.
All that said, decide on which IRA you want and then select a solid balanced mutual fund for her at a mutual fund company.
Frankly, I would make it my goal to find a position that offers a 401k and employer matching contributions.
It is incredibly beneficial for your future savings to have this. Should be a requirement.
Not that simple. In very general terms, you may be correct. However, some employers offer crappy 401ks with lousy, high cost funds and no match. In that case, you are better off with an IRA.
In some industries, they just don't offer 401ks...but working in such an industry might be the best match for a person's skills, interests. I.E. with a baby at home, she probably needs a more flexible restaurant type job....which means giving up the 401k. That's fine as long as you plan accordingly.
Not that simple. In very general terms, you may be correct. However, some employers offer crappy 401ks with lousy, high cost funds and no match. In that case, you are better off with an IRA.
In some industries, they just don't offer 401ks...but working in such an industry might be the best match for a person's skills, interests. I.E. with a baby at home, she probably needs a more flexible restaurant type job....which means giving up the 401k. That's fine as long as you plan accordingly.
Yes this is what I was going to say. She will keep looking for a job, but we've decided that unless it's a great opportunity either in pay or skills she will be able to gain or both, it's better for her to stay home at least through the end of this year.
I will look into some of the options mentioned. Thank you.
Not that simple. In very general terms, you may be correct. However, some employers offer crappy 401ks with lousy, high cost funds and no match. In that case, you are better off with an IRA.
In some industries, they just don't offer 401ks...but working in such an industry might be the best match for a person's skills, interests. I.E. with a baby at home, she probably needs a more flexible restaurant type job....which means giving up the 401k. That's fine as long as you plan accordingly.
Okay, I guess I come from a different perspective - given that every job I've had since graduating college has offered a 401k.
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