What's the long term & retirement like for freelancers?

June 27, 2012 10:57 PM

What is the long-term freelancer outlook like? Where "long term" equals 10 years in until retirement?

I've been freelancing for a while, getting close to 10 years for my current situation (prior to that it was freelancing interspersed with F/T work). So far, it's been a lot of fun and pretty successful. So I'm wondering: What's it like to be a freelancer until retirement? What's it like to retire as a freelancer?

I feel like I'm all set to do this for the long run. I have a business coach who helps me out a lot (and I'll be asking him, too). I have great clients and have developed a solid, professional approach to my work. This, and networking, have landed me some high profile projects in the area where I live.

I know a few freelancers who are in their 50s, and they're doing pretty well. I don't know any retired freelancers, though. So I'm really interested in that part--how it works from those who have been there.

Any input or recommendations on books or articles to read would be appreciated as well.

As for my specialty, I'm a web designer / developer providing key web services and workflows for clients across a range of industries, from design to software-from-scratch. Of course I'm open to hearing about freelancers of any stripe, because I doubt there are a ton of retired freelance web designers.

Thanks!

posted by circular to Work & Money (2 answers total)

Well, the big bar to retirement is the lack of any sort of built-in safety net. My Dad worked for Allstate until they laid him off with an early retirement package in his 50s - that allowed him to keep his company health insurance, and he had a 401k as well. My mom works for herself, and only has health insurance through him (that will change when she hits 65 and is eligible for Medicare, of course.) She also has no corporate-backed retirement fund, so whatever money she has will be what she has consciously chosen to put aside.

The other problem with Mom, of course, is that she likes her work and feels terrible about turning clients away - and she has a very successful practice, and can easily book as many clients as there are hours for. So it's easier for her to just keep working really hard, and very difficult, psychologically, to start to scale back. Combine this with the lack of any built-in retirement packages, and she just. keeps. working.

So it's good that you're thinking about it now, because having an exit strategy early is the way to do it. Figure out the financial side, figure out what your cues to start thinking about dialing it back will be (whether that's age, health, family stuff, or just ennui) and start working towards them. Nothing says that you will ever *have* to retire as long as your health holds out (assuming you keep up with your field) and you could certainly just taper back to something leisurely, but definitely sort out the logistics now.
posted by restless_nomad at 7:56 AM on June 28, 2012

Best answer: I've had my own consulting business for a long time now and am 51. As restless_nomad said, the challenge is the lack of safety net. To me, this means I'm responsible for amassing a pile of money to see me through retirement and lining up the health insurance necessary to keep me out of a dismal nursing home.

You can figure out how much money you might need with this calculator. Read the explanation to choose which figure is the one for you to focus on. Then use a calculator like this one to figure out how much you need to set aside each month starting now to reach that goal.

An independent investment advisor can tell you about tax-deferred investments for the self-employed. If you're in the US, you might also look into a medical savings account, if they still exist.

Health care costs were a big worry for me. I wanted to leave the US for several reasons, and the potential savings in health care became a major influence. I now live in an area of Mexico that has high quality health care for about one-third the US price, plus I easily got insurance that costs one-third what I was paying in the US and offers a lot more coverage.

I work online, so my clients don't care where I live. As a result, I'm able to save more aggressively for retirement, and I don't worry about ending up ignored in a nursing home because here I could afford in-home care.

If I had stayed in the US, I probably would have bought long-term care insurance on top of the increasingly expensive health insurance.

In terms of scaling back work, I've been shifting my business model away from consulting and more toward selling information. This reduces my client contact and means that I still have income coming in but don't have to work as hard to get it. It also gives me a saleable business -- it will be easier for me to hand my products over to someone else than to put a price on my name and goodwill.
posted by ceiba at 10:34 AM on June 28, 2012 [1 favorite]