Retirement options for freelancers [advice needed]

First off, I should probably mention that when it comes to this whole world of retirement funds, contributions, and insurance... it’s all pretty much a total mystery to me. So, I’m asking those who actually know what they’re doing—please, go easy on me, I’m a bit out of my depth here.

So, I was wondering if there are any specific options available here in the States for what we might call a "retirement plan" tailored for freelancers? When I say freelancer, I mean a specific setup: I work as an individual contractor on various projects (mostly for clients abroad). We agree on a project, I get it done, and then I get paid—there isn't really any kind of "permanent employment" involved.

Given those circumstances, I'm curious about what my options are for putting together my own retirement strategy. To be more specific: how much should I be looking at, where should the money go, and how can I best contribute on a monthly or quarterly basis over the long term—something that might actually be reliable for my later years.

Side question: Is there a similar kind of solution for health insurance here in the US?

thanks.

It is just as secure as the government where you pay your taxes.

By the way, you haven't provided enough information for us to give you a proper answer. You didn't specify whether you intend to report your income or if you plan on working under the table.

In any case, there are three pillars of retirement savings, life insurance, and housing savings accounts—all of which receive some level of government subsidy or incentive. Beyond those, you have corporate stocks that you can purchase yourself and liquidate once you retire. There is also real estate; you could invest in acreage to hold onto and sell during retirement to fund your lifestyle. Land rarely loses its value. Look, all of this comes down to your own choices. We could sit here and debate this indefinitely. Nothing is ever 100% guaranteed.

Gregory Williams7 said:By the way, you haven't provided enough information for us to give you a proper answer. You didn't specify whether you intend to report your income or if you plan on working under the table.

In any case, there are three pillars of retirement savings, life insurance, and housing savings accounts—all of which receive some level of government subsidy or incentive. Beyond those, you have corporate stocks that you can purchase yourself and liquidate once you retire. There is also real estate; you could invest in acreage to hold onto and sell during retirement to fund your lifestyle. Land rarely loses its value. Look, all of this comes down to your own choices. We could sit here and debate this indefinitely. Nothing is ever 100% guaranteed.

Of course, I’m not assuming there's such a thing as absolute certainty. That goes without saying.

As for reporting income versus working under the table... could you perhaps give me a brief rundown of how both options look?

These are difficult fundamentals. Anyone in the real world understands this.

You must register either a sole proprietorship or an LLC. A sole proprietorship is cheaper to set up, whereas an LLC provides more freedom and legal protections. Check the other threads for more detailed information.
Once that is settled, you pay yourself whatever salary you choose. The catch is that you must pay taxes to the government on that salary. This is true in any era of history. These taxes are what fund the state.

So, you pay taxes. That tax money isn't entirely thrown away; you are contributing to Social Security. Think of it as intergenerational solidarity. Based on those contributions, the government will provide your retirement benefits in a few years. Those benefits are as secure as the United States itself. Then, there is also your private retirement contribution. I believe it is currently 15% for one part and 5% for another, or something to that effect. However, that might shift to a 10%/10% split in a few years. Perhaps it will. Who knows? No one can say for certain right now.

Then you pay that tax to the government. You can pay it immediately or at the end of the year when you file your tax return. You might even receive a refund if you have many children or high medical expenses. It is too broad a topic to explain everything here. Generally, you can claim many deductions, and they apply a specific tax credit rate to determine your refund. On a gross of $7,200, the tax would be $1,800. Grab a calculator and figure out the percentage. Since you seem lazy, I will do it for you: 25%. But it depends on your income. The higher your salary, the more you owe. I was taken advantage of in my case. Or rather, my employer took advantage of me; had he paid me slightly less, he would have only paid 15%. Regardless, it doesn't matter to me.

To get back to the point, you have various tax brackets—15%, 25%, 35%, 45%, I believe—depending on your total income. Most small business owners pay themselves the bare minimum to avoid handing all their cash over to the government in taxes. If I owned a company, I would likely do the same. It is absurd how much this government takes. But that is because we are heavily in debt and need to repay loans. Whom else are they going to tax if not the people driving the economy?

Moving on. Once you have paid everything owed to the government, you can start saving money. There are several options, but it usually boils down to mutual funds, IRAs, savings accounts, life insurance, or a standard CD. As I mentioned, you can save however you like. You could buy real estate and sell it during retirement. You could buy land. You could buy gold. You can do whatever you want. The only thing that makes no sense is keeping cash under a mattress, because you lose value to inflation. Money itself is just paper that holds no intrinsic value.

And that is essentially it. If you decide to work "under the table"—which is possible if your clients don't require official invoices or paperwork—you can skip the LLC registration and income reporting entirely. You simply put the cash directly into your pocket and then invest that money into your own retirement fund.

There it is. Honestly, I find it strange that you don't already know this...

Oh, right, I almost overlooked a crucial detail. In this alternative scenario, you run the risk of facing criminal prosecution for the rest of your life.

Thanks so much.

Actually, it isn't really about being lazy—it’s a bit more complicated than that.
Coming from a technical background, I tend to be very strict and literal by nature. To me, this whole system feels like a chaotic web of endless norms, regulations, and procedures. It's not just that they are extensive—which wouldn't even be an issue—but they overlap so much that I honestly can't tell what takes precedence, when to apply what, or where one rule ends and another begins. It all just turns into total white noise in my head. So, while you might help me out by saying, "Hey, you need to study this specific regulation," I'll certainly look into it—provided that once I'm done, it's actually settled. I just don't want to find out tomorrow that there are seven other laws that somehow contradict or cancel out everything I just learned. That’s why I tend to ask for explanations like a complete novice.

What really prompted all this, though, was what you mentioned regarding how much this country takes. I don't have any issue with contributing to the government, but seeing the sheer amount taken out of a single service contract... well, it was a bit of a shock. That's why I've started looking into alternatives. My philosophy is pretty simple: if I demand nothing from the state, then I should give as little as possible back to it.
I assume there's some level of general tax responsibility, but when it comes to things like social security or retirement contributions, I'd much rather handle those entirely on my own if there's any way to do so.

So, if I'm following you correctly, it seems impossible to opt out of certain things—specifically that part involving intergenerational solidarity in the retirement system.
After that, you're left with income taxes, which are tiered based on how much you earn.

My takeaway would be this: you can't really distance yourself from the government or redirect those funds into a private retirement plan until you've satisfied all these initial obligations first. Is that right?

Yes, if you have a reported salary, then you ARE obligated to pay taxes. You MUST contribute to Social Security and Medicare.

Everything else is optional.

So, you are forced to fund things that provide you with zero tangible benefit, while anything that actually helps you down the road remains entirely optional. Our government is a joke.

Look, I honestly don't think dodging the government entirely is your best move. After all, those mandatory taxes fund your social security and healthcare, which still operate on a solidarity-based system.
For instance, medical costs can be astronomical, and most people simply couldn't afford to cover a major accident or serious illness out of pocket. (Just look at the news—our great maestro Vjekoslav Šutej has already spent $1.5 million of his own savings on medical bills and still needs more; the situation isn't over yet). We have to admit he saved as much money as most people earn in their entire careers.
The point is to pay that minimum amount to secure your basic retirement and health rights, then manage the rest by mixing various financial products with different terms, risk levels, and guarantees.

Now, deciding which specific products to pick, how much to invest, and which terms work best is a whole different story. I doubt this forum will be much help to you anyway, since you'll just get hit with a million conflicting suggestions that will leave you even more confused. 👍

I see where you're coming from.

There’s something else that just occurred to me—
When someone has a standard full-time job, their Social Security contributions happen every single month without fail. In my situation, though, those payments could potentially come in three-month chunks or even every six months, depending on how the project workload fluctuates. I wonder how that's actually viewed by the system? Specifically, does this lack of monthly continuity affect anything, or is it ultimately just a matter of the total sum contributed by the time retirement rolls around? Or, to put it another way—and I suppose these two things are likely linked—how is the service credit handled in these cases, given that it serves as a primary criterion for pension eligibility, right?

If you sign up for a steady paycheck, you can't just guess when the money arrives. You have to make those payments consistently. There is no room for delays or three-month backlogs. If you fall behind, someone will be knocking on your door immediately. Suppose you earn $0.00 in a given month; then you would pay out 2,000 the first month, 2,000 the second, and 2,000 the third until the next payout cycle hits after three months.

It sounds ideal in theory, but all of this requires strictly regular payments.

Actually, there is an option where you could potentially place your company into a dormant status. You should look into how that works by consulting with other professionals. If you haven't performed any business activities during a given month, you might be able to put the entity on hold without issue. Of course, certain restrictions will still apply.

Mark Nguyen6 said:I see where you're coming from.

There’s something else that just occurred to me—
When someone has a standard full-time job, their Social Security contributions happen every single month without fail. In my situation, though, those payments could potentially come in three-month chunks or even every six months, depending on how the project workload fluctuates. I wonder how that's actually viewed by the system? Specifically, does this lack of monthly continuity affect anything, or is it ultimately just a matter of the total sum contributed by the time retirement rolls around? Or, to put it another way—and I suppose these two things are likely linked—how is the service credit handled in these cases, given that it serves as a primary criterion for pension eligibility, right?

Since some employers don't even remit contributions for over a year at a time, I don't think the specific timing matters all that much. You can always just set that money aside in a dedicated savings account as soon as you get paid...

Wait a second—does this mean that, according to the lawmakers, the whole concept of "freelancing" doesn't actually exist here?

I mean, what's the deal with those independent contractor agreements? If I’m not officially on anyone's payroll, yet I’m regularly picking up gigs based on a contract for services being a different matter... who exactly is coming to knock on my door if I happen to miss a payment one month? On what legal grounds would they even come after me—considering there's no official full-time employment on record?

When I mention what I said above, I’m not necessarily suggesting skipping an entire month—it’s more about the irregularity of the payments.

So, if we assume a standard monthly payment would be $33 (just to use a rough example), what actually happens if I don't make any payments for five months, and then suddenly drop a single $500 lump sum? I suppose I am just curious from a strictly legal standpoint—not looking to find loopholes in the law or anything like that.

Mark Nguyen6 said:Wait a second—does this mean that, according to the lawmakers, the whole concept of "freelancing" doesn't actually exist here?

I mean, what's the deal with those independent contractor agreements? If I’m not officially on anyone's payroll, yet I’m regularly picking up gigs based on a contract for services being a different matter... who exactly is coming to knock on my door if I happen to miss a payment one month? On what legal grounds would they even come after me—considering there's no official full-time employment on record?

A contract for services being a different matter... Under that type of setup, you're looking at roughly 35% taken out for taxes and withholdings—correct me if I'm wrong! Sometimes it's a win, sometimes it isn't. It all really boils down to your total annual income. If your tax bill from those service contracts ends up being higher than what you'd owe running a small business with monthly obligations, then it might not be worth it... $533 Paying taxes is one thing, but switching to an LLC is definitely the better move. After a while, my contract for services being a different matter just wasn't worth it because I realized I was handing way too much money over to the IRS. I eventually switched to an S Corp, which feels pretty similar to an LLC. This isn't exactly my area of expertise, though... you should probably chat with a solid CPA to get a more specific recommendation for your situation.

crimsonseal13 said:Look, I honestly don't think dodging the government entirely is your best move. After all, those mandatory taxes fund your social security and healthcare, which still operate on a solidarity-based system.
For instance, medical costs can be astronomical, and most people simply couldn't afford to cover a major accident or serious illness out of pocket. (Just look at the news—our great maestro Vjekoslav Šutej has already spent $1.5 million of his own savings on medical bills and still needs more; the situation isn't over yet). We have to admit he saved as much money as most people earn in their entire careers.
The point is to pay that minimum amount to secure your basic retirement and health rights, then manage the rest by mixing various financial products with different terms, risk levels, and guarantees.

Now, deciding which specific products to pick, how much to invest, and which terms work best is a whole different story. I doubt this forum will be much help to you anyway, since you'll just get hit with a million conflicting suggestions that will leave you even more confused. 👍

You could technically pay for your own healthcare privately, and nobody would care about your employment situation, and it might even cost you less than $133/month.

Mark Nguyen6: how are they even paying you? cash under the table, through a domestic account, or an offshore one...🤷

Charles Ramos7 said:You could technically pay for your own healthcare privately, and nobody would care about your employment situation, and it might even cost you less than $133/month.

Mark Nguyen6: how are they even paying you? cash under the table, through a domestic account, or an offshore one...🤷

Right, I completely missed that detail earlier—my apologies for the oversight.

As for the payment methods, they offer either a standard checking account or a foreign currency account. I have both, though so far everything has been sent to my checking account.

That said, if there were ever a reason to switch over to a different type of account, I wouldn't really mind. (Or even a third option I haven't had to use yet—it doesn't particularly matter to me.)

Before you even start worrying about retirement, you’ve got to decide if you’re going to be playing by the rules or working under the table (or somewhere in between). If you're staying legal, you'll be contributing to Social Security anyway, so then we can actually talk about where to put any extra cash. It really comes down to the scale of what you're doing—whether you'll need to register for sales tax or if this is just a little side hustle versus a full-time gig.

Well, it’s a bit of a mixed bag at this stage—I have answers for some questions, but for others, I suppose I'm still waiting on more information before I can really say. That said, let me try to frame things this way:

1) I am looking for something that can serve as a long-term career path, rather than just a temporary gig.
2) Let's assume we are discussing an annual income in the neighborhood of roughly $50—and we might consider that a baseline figure.
3) Regarding the legality of the venture—to be honest, I would love to understand the mechanics behind every possible route. If it's an option, my preference would be to pursue a completely legitimate path and operate strictly by the book. Of course, that is assuming the "gray area" stuff doesn't involve a significant portion going to the IRS. In that specific case, I might consider some semi-legal alternatives. But, for now, I think I'm leaning toward the legal routes.