Comedian Jay Leno is a master of the side hustle. Jay has said “I live on the money I make as a comedian, and I put all the TV money in the bank.”

For years, we all knew Jay as the host of Tonight Show, but to him, that was his side gig! He knew that the television business is fickle, so he lived as if that source of income could dry up at any time.

Smart guy.

There are lots of reasons I recommend finding freelance work or another side hustle.

 It’s a tremendous way to pay off debt like I did. It’s also the best way to amplify your savings.

If you can get into a position where you can live off your day job and save 100 percent of money you earn on the side, you can reach your savings goals faster, whether it’s to buy a new home, pay for your wedding, or achieve financial freedom as early as possible.

And if it’s financial freedom you’re after (you know, “retirement”, otherwise known as the day when work becomes optional rather than necessary), freelance income can work even harder for you thanks to a retirement savings option for the self-employed.

Related: 23 Things Beginners Absolutely Must Know About Saving for Retirement

Hopefully you already know about IRAs, or individual retirement accounts. These savings accounts, available to everybody, are the best way to start saving for financial freedom.

You can choose to contribute money into a traditional IRA and take a tax deduction on the contribution this year or, better yet, contribute after-tax dollars into a Roth IRA which lets you withdraw your money (and interest) tax-free down the road.

Related: Roth IRA or Traditional IRA: What Do You Do?

For big earners and savers, however, the IRA has its limits. Literally.

In 2017, savers under 59 ½ can only contribute up to $5,500 into an IRA. And if your income exceeds certain amounts, you’re restricted on how much you can put into a Roth IRA—or excluded altogether.

Enter the SEP IRA

A SEP, or “simplified employee pension”, is a kind of individual retirement account designed for very small businesses and the self-employed.

The good news? You can participate in a SEP IRA if you have any amount of income from self-employment or freelancing, even if you have a day job.

Setting up a SEP IRA is as easy as any other investment account. Check out our recommended investment accounts for young investors.

SEP IRA contributions are tax-deductible (there’s no option for post-tax or Roth contributions).

Like a regular IRA, you have until April 15 to open a SEP IRA and make contributions for the prior tax year.

But wait, I’ve saved the best for last.

The biggest advantage a SEP IRA is that you can contribute much more than $5,500 each year. As of 2017, you can contribute up to 25 percent of your self-employment income to a maximum of $54,000 (up from $53,000 in 2016). Read the full IRS contribution rules here.

And remember, that money is tax-deductible, so the more you contribute, the fewer taxes you pay this year.

I opened a SEP five years ago to invest some of the money I earned blogging while I was still at a day job. Today it’s grown into my primary retirement account.

Full-time freelancers have another option—the Solo 401(k).

Solo 401(k)s have a bit more paperwork involved with them but may offer participants some advantages over a SEP, like the ability to make Roth (post tax) contributions. If you’re self-employed, a quick visit with a CPA would be valuable in choosing between the two plans.

Summary

The SEP IRA is the perfect retirement account to throw your side gig money into. You can save for retirement and there is a much higher limit to how much you can contribute in a year.

Read more:

  • Where Should You Invest First: A 401(k) Or An IRA?
  • What You Need To Know About Making Prior-Year IRA Contributions
  • Best Place to Open an IRA
  • Choosing Investments for Your IRA