Working Without a Net in the “Gig Economy”
Posted on June 10, 2017
Millions of Americans are trading full-time jobs for the freedom (and risks) of self-employment, relying on temporary “gigs” to earn a living. It’s easier to do that now, thanks to advances in digital technology, but many who choose this path are also motivated by difficulty finding full-time work. And while you may think of self-employment as a stopgap between full-time jobs, it could easily become your permanent way of working.
Supporting yourself without a guaranteed salary or such traditional full-time benefits as paid vacation and employer-sponsored health-care and retirement plans requires careful planning and a clear sense of what lies ahead.
Rising health-care costs are especially challenging for self-employed people if there is no employer chipping in. For some, the answer may be joining a spouse’s health plan. Others may find coverage through healthcare.gov, or through professional organizations that offer plans for freelancers. You can also try to negotiate for health-care benefits with your gig employers, perhaps in exchange for reduced compensation.
In the gig economy, any of your clients could cut or slow down payments or even go out of business with little notice. Have an emergency fund so you can withstand those unexpected gaps between gigs and checks. Finally, do not underestimate your regular expenses. Most of them, from your computer to your business car to tech support, will now fall on your shoulders.
When you are working gigs, there is no automatic withholding. You will likely be paying quarterly estimated taxes. This requires a greater degree of control over your spending, so that you have enough to cover taxes when they are due. Work with a tax professional who can help you set a strategy for paying taxes, taking advantage of any appropriate deductions.
Plan for your retirement. One popular option for the self-employed is a Simplified Employee Pension, or SEP IRA. Ask your advisor about these and other plans that offer much higher contribution limits than traditional IRAs.
For more information, contact The Menashe Morley Group in the Rancho Santa Fe office 858-381-8113. The Menashe Morley Group, serving the community for over 32 years: David Menashe is a Senior Vice President and Wealth Management Advisor, Bruce Morley CRPC ® is a First Vice President and Wealth Management Advisor and John Naviaux CPWA ® is a Vice President and Wealth Management Advisor.
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