Retirement Planning for Performers: Choosing the Right Plan for Your Financial Goals

As we approach a new year, I find that many of us attempt to establish financial savings habits, especially for the long term, but often fall short due to the challenges we face relating to our (inconsistent) income: When is my next contract? How many gigs can I book this year? How far apart will they be from each other? How much will I make? Is it even enough to pay the bills?

We all have basic needs, like a place to live and food to eat, and some valid near-term wants—and most of us rightfully prioritize paying for those things. But why do we find it difficult to also set aside money for our future selves? If we don’t start saving now, we may find ourselves in a difficult position in our later years, when we feel like we "have to work" rather than choosing to work. This is especially true for performers, who may not have planned ahead and saved enough money when the time was right. That’s why it’s important to start saving as early as possible so that we can have the retirement we want and deserve.

Union Retirement Plans

Actors Equity offers its members two financial plans: a Traditional 401k and a pension. The 401k is a retirement savings plan in which members contribute their own money and receive a matching contribution from their employers. The money is contributed pre-tax, meaning that you can take a tax deduction on your contributions in the current tax year, which can lower your taxable income and save you money on your taxes. The money in the 401k then grows tax-free, but will be taxed as ordinary income when it is withdrawn. The pension plan is a retirement benefit that is based on the member's work history with AEA and provides a monthly payment once the member reaches a certain age, usually in their 60s.

SAG-AFTRA, another union for actors and other performers, offers a pension plan as a retirement benefit for its members. This plan may be structured differently than the pension plan offered by AEA. Note that, unlike AEA, SAG-AFTRA does not offer a 401k plan.

The problem is that members of these unions can only contribute to their 401k or earn more pension dollars when they work on union contracts. If they are not working on these contracts, they are unable to contribute or earn towards these plans.

This is why it is important to take advantage of contributing to union plans like the AEA 401k and to save and invest extra money for the long term. The challenge is how to continue saving and investing when we're not consistently working on union contracts. What are our other options for retirement planning when we're not on these contracts?

Other Retirement Plans

There are different types of retirement plans and investment accounts that can help you save and invest for the future. Two of the most common types are Traditional IRAs and Roth IRAs. These plans offer tax benefits, which can help you save money on your taxes and accumulate more wealth.

A Traditional IRA is a retirement savings plan that works like a traditional 401k plan. Like a Traditional 401k, the money is contributed pre-tax, meaning that you can take a tax deduction on your contributions in the current tax year, which can lower your taxable income and save you money on your taxes. Although you don't have to pay taxes on the money while it's in the account, you have to pay taxes as ordinary income when withdraw money from a Traditional IRA.

A Roth IRA is a retirement savings plan that works in the opposite way. With a Roth IRA, you contribute money to the plan with after-tax money, which means you don't get a tax deduction on your contributions. However, the money in the account grows tax-free and you don't have to pay taxes when you withdraw the money from the account. This can be a good option if you expect to be in a higher tax bracket when you retire, because you'll be paying taxes on the money at a lower rate now.

Make Savings a Habit

Which plan is best for you depends on your tax situation and income level. If you have earned income, you can contribute to either of these plans, even if you are not working on a union contract. It's a good idea to consider your financial goals and talk to a financial professional to help determine which plan is right for you.

Investing in our retirement consistently is key, no matter what career path we're on. Whether we're working on a union contract or have a temporary job, setting aside money for our retirement should be treated like a non-negotiable expense, just like paying rent or a mortgage. By consistently investing these dollars as if they were an essential part of our budget, we can work towards better financial success and live the way we want to, rather than feeling like we have to.

Disclosures

 * This writing is provided for informational purposes only and includes a discussion of one or more tax-related topics prepared to assist in the promotion or marketing of the transactions or matters addressed. It is not intended (and cannot be used by any taxpayer) for the purpose of avoiding any IRS penalties that may be imposed upon the taxpayer. Neither Field Financial Strategies and its employees nor New York Life Insurance Company, its subsidiaries, affiliates, agents and employees, and the Publisher, are not in the business of providing tax, legal or accounting advice, and none is intended nor should be inferred from the foregoing comments and observations. Clients should be advised to seek the counsel of their own tax, accounting and legal advisors who must form their own independent opinions on these matters based on their independent knowledge and research. Sam Strum is a Financial Advisor offering investment advisory services through Eagle Strategies LLC, a registered investment advisor. Sam Strum is an Agent with an affiliate, New York Life Insurance Company (NY, NY) and a registered Representative offering securities products through an affiliate, NYLIFE Securities LLC (member FINRA, SIPC), a licensed insurance agency. Field Financial Strategies is not owned or operated by New York Life Insurance Company/Eagle Strategies LLC/NYLIFE Securities LLC or its affiliates.

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Samuel E. Strum (Sam) is a Financial Advisor on the Field Financial Strategies, LLC advisory team. As a Financial Advisor, Sam believes in empowering his clients to take ownership of their lives in pursuit of their goals and assisting them in achieving financial independence. His passion in this area developed when he worked in New York City’s Broadway theater industry. Working with artists and entertainment professionals, he realized that many lacked financial literacy and sought trustworthy financial guidance. In response, Sam pivoted to a career as a financial advisor to provide financial direction to those working to achieve their financial goals. As a Financial Advisor with Field Financial Strategies, LLC, Sam works with professionals, business owners, and successful creative individuals to evaluate their current situation and design a course to help them accomplish their goals.