Being on your own, career-wise, has its plusses and minuses.
Plusses? No boss, no cubicles, no problem if you want to work from the beach. Minuses? Well, besides a pretty skimpy public safety net, you have to figure out how to be smart about saving and investing without the help of an HR department or a 401(k).And that's why the feds created the SEP IRA. And it's why we just launched our very own optimized-return, low-fee version of it.
Why is the SEP IRA the best way to save for retirement if you're freelance?
Well a traditional IRA is great — among other virtues, every dollar you contribute lowers your income tax. The problem is you can only contribute $5,500 to it annually. That's way less than a 401(k) — which maxes out at $18,000, plus any contributions your employer makes on your behalf.
The SEP IRA — it stands for Simplified Employee Pension Plan, by the way, not Self-Employed Pension Plan — has the same advantages as a traditional IRA, though the tax deductions are calculated a little differently (if you want to know more about how, click here.) But more importantly, a SEP also allows you to contribute up to 25% of your net income to a maximum of $54,000.
Wealthsimple uses technology and smart, friendly humans to help you grow and manage your money. Invest and save in a better, simpler way