As an independent contractor, you may be wondering about your retirement options. Fortunately, one option available to you is to contribute to an IRA, or Individual Retirement Account.

Contributing to an IRA is a great way for independent contractors to save for retirement. There are different types of IRAs, including traditional and Roth, but the main difference between them is how they are taxed.

With a traditional IRA, contributions are tax-deductible, meaning you can deduct the amount you contribute from your income for tax purposes. This can lower your taxable income and reduce your tax bill. However, when you withdraw the money in retirement, it will be taxed as income.

On the other hand, with a Roth IRA, contributions are not tax-deductible, but withdrawals in retirement are tax-free. This can be advantageous if you expect to be in a higher tax bracket in retirement.

As an independent contractor, you can contribute up to 100% of your earned income, up to a maximum of $6,000 for 2021 (or $7,000 if you are over the age of 50). This is beneficial because it allows you to set aside money for retirement while also reducing your tax bill.

Another advantage of contributing to an IRA is that it can be set up and managed easily online. There are many websites that offer IRA accounts, and you can set up automatic contributions from your bank account to make saving for retirement even easier.

Overall, contributing to an IRA is a great option for independent contractors looking to save for retirement. It allows you to lower your tax bill while also setting aside money for the future. Be sure to consult with a financial advisor to determine which type of IRA is best for your specific situation.