An IRA (Individual Retirement Account) is a type of savings account that is specifically designed to help individuals save for retirement. IRAs can be opened by anyone who earns income, including freelancers.
IRAs matter to freelancers because they offer a tax-advantaged way to save for retirement. Depending on the type of IRA, contributions may be tax-deductible or made with after-tax dollars, and the earnings grow tax-free or tax-deferred until you withdraw the money in retirement. This can help freelancers save more for retirement while potentially reducing their current tax liability.
There are several types of IRAs, including traditional IRAs, Roth IRAs, and Simplified Employee Pension (SEP) IRAs, and each has its own rules and benefits. Freelancers should consider their individual circumstances, including their income level, tax bracket, and retirement goals, when choosing an IRA.