Need extra income in retirement? Try freelancing
Americans used to follow a set path: Work for decades, retire and spend their golden years never thinking of work again. But retirees seeking supplemental income, social connections or even the opportunity to dabble in different interests might want to remain in, or re-enter, the workforce.
Those seeking work in retirement previously had few options other than regimented part-time jobs. Technology and a boom in what's called "the gig economy" have changed this. A growing freelance market has opened a whole new world of opportunity for retirees who want income without the pressures of a traditional job.
What is freelancing?
Freelancing means working for an individual or business as an independent contractor rather than as a full-time employee. Freelancers usually receive no benefits, but they have far more flexibility and often work on their own schedule, often at home. Some freelance work is done on a project-by-project basis, while other opportunities are ongoing. Freelancing gigs can be as varied as a one-time pet-sitting job or consulting on business strategy for 10 hours monthly.
Why freelancing works for retirees
"Freelancing and retirement just go together," says Sara Horowitz, author of "The Freelancer's Bible" and founder and executive director of Freelancers Union, an organization working to serve the needs of independent workers. "Since 2007, Freelancers Union has seen a 380% increase in our members over 50," she says.
Horowitz says the knowledge a retiree brings to the table is invaluable. "A career's worth of experience and insight is a highly sought-after commodity, especially for companies looking for help on a project or guidance on a strategic decision," she says.
The flexibility is also appealing to retirees since freelancers get to control when they work, how much they work and with whom they work, Horowitz says. The added variety and excitement can also be a plus, she says.
Veronica Rose, a retiree in the Washington, D.C., area, strongly agrees. She worked at a medical assistant school, and when the campus shut down, she decided to retire at 62. Rose found she needed more money to make ends meet, so her granddaughter suggested she drive for the ride-booking service Lyft, which lets drivers use their own vehicle like a taxi.
Rose says she loves driving for Lyft. "Not only does it supplement my income, but I've also met some really nice people and friends along the way," she says.
The freedom of freelancing is also very appealing to her. "I do it when I want, if I want and how I want," Rose says. "The flexibility allows you to be your own boss, and in retirement, that's what I'm really looking for."
Finding freelance work
Websites such as Elance.com and Guru.com are dedicated to helping freelance professionals find work. Projects are posted for opportunities as varied as translating, transcribing and researching. Some of these sites require you to bid on projects, and competition can be fierce.
There's also Craigslist.org, where people post local ads seeking help with such tasks as tutoring and events, though be wary of potential scams. Another popular site to find freelance gigs is TaskRabbit.com. New sites for freelance work are always popping up, including Thumbtack.com.
As Rose did, retirees are flocking to ride-booking companies Uber, Lyft and Sidecar. As a driver, you use a smartphone app to indicate when you're available, and you give rides to nearby passengers without exchanging cash.
Important financial implications
Freelancing does have downsides. "A lot of people who come to freelancing after a long career in a traditional workforce don't recognize how much responsibility comes with freelancing," Horowitz says. "Freelancers not only need to do the work, they also need to do their own taxes, their own marketing and their own networking."
Mike Sander, vice president at The Creative Planners Group Ltd., a financial planning firm in Tarrytown, N.Y., says freelancing makes taxes murkier. "One of the main tax implications for someone who works in freelance, consulting or contracting work is the fact that not only do you have to pay federal and state taxes on your income, but there is also the self-employment tax," Sander says. (Self-employment tax is a Social Security and Medicare tax for those who work for themselves; an employer generally pays this for full-time employees.) Sander also encourages freelancers to remember that taxes aren't withheld from earnings received as an independent worker, so as a freelancer you're in charge of calculating and paying taxes yourself.
Since freelancing can greatly change your tax situation, Sander recommends meeting with a tax advisor to avoid surprises and anticipate financial consequences. Advisors can also help you decide whether to incorporate as a business, which comes with its own set of pros and cons.
Keep in mind if you retire early that your Social Security benefits will be reduced if you earn above a certain amount. Rose was frustrated to learn that until she turns 65, the amount of money she can make driving with Lyft while still keeping her benefits is limited. A tax advisor or financial planner can help you understand how this affects you.
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