Are you one of the millions of Americans who doesn't have access to a traditional pension plan or even a 401(k) plan through their employer? If so, you may worry about how to properly save and plan for retirement.
One thing that can make a huge difference in your ability to prepare for retirement is a side hustle. Even the most modest side gig can fix your retirement savings challenges in three ways. Here's how to use each.
1. Earmark Side Income
Determine to use the money earned outside your traditional paycheck specifically as your retirement savings plan. After paying expenses and any related extra taxes, put that money directly away into either a taxable brokerage investment account or an individual IRA account. Once you get into this habit, that money will start to grow exponentially and you won't miss it from your regular income.
2. Open a Solo Retirement Plan
Small business owners have access to several types of retirement plans specifically designed for their use. This includes the solo 401(k) plan which allows you to design and contribute to your own 401(k) plan from your earnings in your side business. You can also choose from options like a SEP IRA or a SIMPLE plan, depending on how much side income you earn and what you want to put away.
Keep in mind that while your contributions are limited to earned income from your side business, it can be contributed from your overall pool of money. So if you earn $10,000 as a summer river guide, you can contribute that money to your annual retirement fund from your holiday bonus at work instead.
3. Grow an Asset
Retirement accounts aren't the only way to save for retirement. Some people invest in hard assets that can either produce income or be sold later in order to fund retirement. While you may not get as many tax benefits from this method, it could provide a more durable source of retirement income.
Launching yourself as a part-time landlord, for instance, is a good way to create either a passive income stream or build an appreciating asset to sell later for retirement purposes. An asset earned through a side gig could be anything you're interested in, from a stake in a small business to royalties from a created work.
Where to Start
Want to know more about using a side hustle to fund your retirement? Start by meeting with a retirement advisor in your state today. Together, you can craft a plan that meets your needs no matter what you have or don't have access to at work.Share