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A Guide to Protecting Your Health and Future

A look at health insurance and retirement plans for workers who can't rely on employer-based options.

Maze with the word Plan in the center.

One of the most significant drawbacks to contract or freelance work, and some part-time work, is a lack of health insurance and retirement plan options. Many full-time salaried workers enjoy the security offered by such benefits. Yet if you lack these options, you run the very real risk of massive medical bills or an underfunded retirement.

With that in mind, let's take a closer look at health insurance and retirement plans for workers who can't rely on employer-based options.

How To Plan For A Secure Retirement

If you aren't lucky enough to have a defined benefit pension or 401k retirement account, there are still a variety of options to help you get ready for your post-work life.

First, it's important to break the cycle of "spending what you make." Most people fail to save more money even when they make more money. Instead, they opt to spend that extra money on lifestyle enhancements -- a bigger house, car or luxury goods.

Avoiding this pitfall is critical for independent workers. Salaried workers have the benefit of automatic deductions to pay for insurance and retirement. When the responsibility falls on you alone, it's far too easy to simply defer saving money.

Instead of falling into this trap, open an Individual Retirement Account (IRA) and fund it with a portion of your monthly earnings. You can start small with just a few-percent to get in the habit. Ultimately, however, you should aim to save between 10 to 15-percent of your income for retirement. That may seem high, but remember -- you don't have an employer matching your contributions. Another smart option is the solo 401k, which allows you to contribute up to $18,000 annually plus a percentage of your net earnings. These accounts offer the same tax advantages as standard 401ks.

Here's to Good Health

Health insurance used to be the paramount obstacle preventing many people from working independently. It simply wasn't affordable enough for some people to purchase privately. Even worse, millions of part-time workers who earned too much to be eligible for government programs had no health insurance at all.

These concerns have been alleviated to some degree by the implementation of the Affordable Care Act. The law radically changed the U.S. insurance marketplace. Numbers released in March by the federal government show that 16 million people have acquired insurance coverage over the last five years.

That's due in part to the fact that carrying health care insurance is now mandatory -- fail to do so and you are required to pay a fine. Yet if you're struggling to pay for even the most basic plan, it's likely you're eligible for one of the federal subsidies offered to mitigate the cost of buying insurance. By visiting a state or federal health care insurance exchange, you can secure a policy and determine your eligibility for financial subsidies.

The Takeaway

Part-time and independent workers must shoulder a serious responsibility with regard to their health insurance and retirement savings. Failure to do so may have calamitous effects.

By taking advantage of individual retirement accounts and new, cheaper insurance options, workers can put themselves in the best possible position to stay healthy and prosper.