{"id":22651,"date":"2020-02-11T08:00:00","date_gmt":"2020-02-11T13:00:00","guid":{"rendered":"https:\/\/honeybook.site.strattic.io\/?p=22651"},"modified":"2022-09-20T23:55:56","modified_gmt":"2022-09-21T06:55:56","slug":"retirement-savings-for-the-solopreneur","status":"publish","type":"post","link":"https:\/\/hbb.dev.reliablepenguin.com\/blog\/retirement-savings-for-the-solopreneur","title":{"rendered":"Retirement Savings for the Solopreneur"},"content":{"rendered":"\n
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Saving for retirement can be an uncomfortable topic. We often think it\u2019s so far off that we needn\u2019t worry about it now, or we feel we\u2019ll never be able to save enough even if we try.<\/p>\n\n\n\n

But the reality is we all can and should<\/em><\/strong> plan for retirement. And with the increasing costs of goods and services (especially ones that are important in retirement, like healthcare), it\u2019s more important than ever to have a solid plan to allow your investments to grow over time.<\/p>\n\n\n\n

Why start thinking about retirement now?<\/strong><\/h2>\n\n\n\n

If you\u2019re in your twenties or thirties and plan on retiring at 65, why worry about retirement now\u201430 or 40 years in advance?<\/p>\n\n\n\n

Because of the power of compound interest.<\/em><\/strong><\/p>\n\n\n\n

Taking the S&P 500 as a general indicator of overall stock market performance: If 30 years ago you invested $1000 in the S&P 500, then (including growth & dividends) you\u2019d have $16,800 today\u2026 a 17x growth! And if you had invested that $1000 40 years ago, you\u2019d have $84,100 today.<\/p>\n\n\n\n

A sound savings strategy involves continued saving over time, so let\u2019s take a more realistic example.<\/p>\n\n\n\n

Suppose you invested just $100 per month into the S&P 500 over the past 40 years, for a total of $48,000 invested. Today, that portfolio would be worth $683,000!<\/p>\n\n\n\n

These numbers might seem fantastical, but they aren’t made up \u2014\nthey\u2019re actual real numbers from the market.<\/p>\n\n\n\n

What if the market goes down and I lose money?<\/h3>\n\n\n\n

The stock market is volatile, so your retirement investments can certainly lose value. But this actually makes it even more important to start saving early!<\/p>\n\n\n\n

Let\u2019s say you were unlucky and decided to put $1000 in the S&P 500 right at the peak of the great recession in October 2007. By March 2009, you\u2019d have lost 49% of your investment\u2019s value, but luckily, you were smart enough to be saving for the long term. Today, 12 years later, you\u2019d have $2566 (more than double what you started with.) Historically, the markets have always trended upwards over long-time horizons, which makes it perfect for retirement savings.<\/p>\n\n\n\n\n\n

Benefits & types of retirement accounts<\/h3>\n\n\n\n

If you\u2019ve decided now is the time to open a retirement account, the next step is to decide what type of account.<\/p>\n\n\n\n

Retirement accounts generally offer tax benefits. (That\u2019s the government telling you it wants you to save for your retirement!) The ones we\u2019ll talk about here all feature tax-free growth<\/em>, which means you don\u2019t pay income tax on any dividends or realized gains inside the account.<\/p>\n\n\n\n

Additionally, pre-tax<\/em> retirement vehicles allow you to deduct contributions off of your income, so you get to defer paying income tax on that money until you withdraw. Post-tax<\/em> retirement vehicles are the opposite, allowing you to put your already-taxed money into the account, and withdraw it completely tax free in the future.<\/p>\n\n\n\n

For the solopreneur, the most popular types of retirement accounts\nare:<\/p>\n\n\n\n