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Thread: How do freelancers retire?
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Oct 9, 2006, 07:06 #1
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How do freelancers retire?
I'm curious, if someone is a freelancer and works for himself will that person have to work forever or is there a way to retire?
Sure if they make so much money and become rich they can retire anytime they want. but im not talking about that, what about a freelancer that only makes enough to pay the mortgage and isnt loaded, is there a way he can retire?
thanks
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Oct 9, 2006, 07:10 #2
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That's what a pension is for. Whether your a freelancer or an employee, a pension is a must.
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Jamie Harrop
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Oct 9, 2006, 07:14 #3
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Start investing your money in things like pensions, property, shares etc etc. How does anyone cope with retirement if not for their investments?
And if you aren't earning enough to save for a pension, best start working out how to increase your income, fast
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Oct 9, 2006, 07:34 #4
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In the US, freelance is a business. You can be a sole proprietor or incorporate (or take on a partner), in any case, if you report your income you must pay both your half of the social security taxes as well as the "employers" share. Optimistically, social security will still be around when you retire and you'll get the same "wonderful" benefits that today's seniors do. (That was sarcastic by the way
)
Additionally, you can open an IRA that is your retirement pension. The best thing to do if you are freelancing is to consult with a CPA who can help you understand your retirement options. Then go find a good financial advisor who can counsel you on the best investments for your income level.Linda Jenkinson
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Oct 9, 2006, 08:39 #5
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There are lots and lots of options. Contrary to popular belief, there are more options for retirement savings for business owners (or freelancers) than there are for full time employees. The full-blown 'pension plan' is mostly a thing of the past, but you'll find that the limits for 401k's, IRA's, etc. are much more generous when you're working for yourself.
If you can save, you can retire well.The fewer our wants, the nearer we resemble the gods. — Socrates
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Oct 9, 2006, 09:16 #6
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Work forever sounds about right, at least it has been my plan so far. Either that, or save. Social Security will go bankrupt long before most of us retire and I am seriously considering filling out papers to drop out. Can use extra money for investments
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Oct 9, 2006, 09:41 #7
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There are also plenty of marketing and PR firms today that started as freelance outfits. Work hard and long enough, and soon you find that you're hiring an assistant to help you out. Then office space. Then a vice president. Pretty soon you're just stopping in once in a while to make sure the place hasn't burned down.
Like Shy said, freelancing is a business (at least in the U.S.). Keep growing, keep tackling better jobs and recruiting better clients, and eventually the business itself becomes the investment for retirement.Robert Warren, B2B Copywriter - CONTACT
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Oct 9, 2006, 10:14 #8
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and I am seriously considering filling out papers to drop out. Can use extra money for investments
Onto the original question...
In any line of work if you're living from paycheck to paycheck you aren't going to retire well. Save more money. You should have enough money to live on for atleast 6 months in short term liquid assets (stocks, money markets, savings accounts) and then you'll want atleast around 1-2 million saved up by the time your retire, if you want to stop working entirely. Assuming inflation doesn't get out of hand and you don't mind living relatively cheap.Chris Beasley - I publish content and ecommerce sites.
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Oct 9, 2006, 10:26 #9
Originally Posted by aspen
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Oct 9, 2006, 10:33 #10
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Originally Posted by aspen
The fewer our wants, the nearer we resemble the gods. — Socrates
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Oct 9, 2006, 10:54 #11
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Originally Posted by Sagewing
I paid about $0.30-$0.32 on every dollar I made last year... I've been a bit more careful this year, but I've been considering the corporate route.
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Oct 9, 2006, 11:56 #12
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Ouch.. you shouldn't have much problem reducing that... You aren't doing you're own taxes, are ya?
The fewer our wants, the nearer we resemble the gods. — Socrates
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Oct 9, 2006, 14:25 #13
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Originally Posted by aspen
Just sending Request for Withdrawal of Application seems to make you ineligible to draw benefits, but you still would be required to pay SS taxes, because tax liability is created by having SSN rather than accepting benefits. So it has to be deactivated.
Now the problem is that you will no longer have a SSN, and it's tied to many things. Like, if your state requires SSN to get a driver license, you'll have to get your license from a state that doesn't, etc. And after 9/11 it's difficult to open a bank account without SSN. You can cash checks under $1000 without bank account through alfii.com, but I don't know about checks over $1000. I think depositing them into your wife's/friend's account shouldn't be a problem, as long as you declare them on your tax return
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Oct 9, 2006, 14:37 #14
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How does deactivating your SSN exempt you from the requirement to pay SSN on your payroll or income?
The fewer our wants, the nearer we resemble the gods. — Socrates
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Oct 9, 2006, 15:13 #15
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Originally Posted by Sagewing
The guy that did my taxes is very experienced (used to be an IRS auditor, has been a CPA for 30+ years), but I didn't do a very good job of tracking my expenses and such since it was my first year as being completely self employed. This year should be quite different...
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Oct 9, 2006, 15:27 #16
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Originally Posted by demosfen
No you can't. The request for withdrawal is if you have filed an application to begin receiving your benefits at retirement and change your mind. It doesn't give you the ability to with hold earnings from Social Security nor does it allow you to "drop out" of the loop. If you read the whole form, you should have understood that.Linda Jenkinson
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Oct 9, 2006, 16:33 #17
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Yes but like I said, the important part is that you would attach it to a letter rescinding your SSN. It's having SSN that creates SS tax liability, not the fact that you accept benefits. The real issue is the inconvenience of handling things like money and driver license (in states that require SSN to get one) without having SSN
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Oct 9, 2006, 16:46 #18
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Originally Posted by demosfen
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Oct 9, 2006, 17:00 #19
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Originally Posted by Sagewing
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Oct 9, 2006, 17:12 #20
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Originally Posted by Hartmann
You are right about the inconvenience of not having the number, if it wasn't for that I would be out of the system by now.
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Oct 9, 2006, 18:45 #21
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Originally Posted by demosfen
There are lots of stats, but almost everyone agrees that the SS system AS IS will be liquid until almost 2040, and some estimates say 2050. At that time, the system will begin running at a deficit, which isn't the same as going 'bankrupt'. Do the math, use a dictionary, and rethink. The SS system needs reform, but your interpretation is flawed.
Originally Posted by demosfen
Originally Posted by Westech
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Oct 9, 2006, 19:07 #22
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Very interesting. Thanks for your detailed response. It looks like I (and my accountant) may need to re-evaluate our approach.
Originally Posted by Sagewing
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Oct 9, 2006, 19:13 #23
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My corp has to pay quarterly estimated taxes to the state of California (just for state tax, which is minimal for an s-corp) and my paycheck has withholding taken out when I get paid each month. To keep things straight for the end of the year, avoid underpayment penalties, and skip quarterly estimated payments my accountant adjusts the withholding so that enough is withheld from my gross paycheck to cover the projected distributions for that year. The effect is that my paychecks usually have about 70% of the gross pay withheld and only 30% paid to me - but it works out better for me that way in the end.
The fewer our wants, the nearer we resemble the gods. — Socrates
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Oct 10, 2006, 05:06 #24
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Originally Posted by Sagewing
Indeed! It doesn't. I just looked up every reference to "rescind" on their site and there is nothing about going off the grid. Rescinding benefits is, of course, allowed but even then you must file the appropriate forms (Of course!) .
As mentioned before, the only case where you are not obligated to pay SS is when you are part of a religious group such as the Amish. Since Amish income all goes to the church and is dispersed among its parishoners in accordance with their need, it is not taxable (neither income taxable or SS taxable) as far as I can tell.
However, if anyone here has thoughts of "rescinding" their Social Security, they should consult a good tax lawyer or CPA to learn the implications involved instead of acting on the advice of members of this forum.Linda Jenkinson
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Oct 10, 2006, 06:32 #25
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Originally Posted by Shyflower
A good lawyer might help, but CPAs have no clue about it, mine gave me a blank stare when I told her that my daughter doesn't have SSN. Not that she's not good, it's just not something CPAs know about
Amish don't pay SS because they don't have SSNs. If you learn Pensylvania Dutch and move to Lancaster county you'll still need to rescind your SS application to avoid paying into the fund. They do have their own pension fund, but it's not why they are not liable for SS tax. The law doesn't require anyone to be enrolled in a pension fund. It's all about having the number, if you don't have one and send a check to IRS to pay your SS tax they'll return it
Anyway, I hope to go ahead with this once I rearrange my business so that I can run it without SSN (have to sell part of it to my wife for $1 or something, because some things can't be done without SSN). Ask me in a few monthsLast edited by demosfen; Oct 10, 2006 at 07:08.
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