Considering the number of people today earning money from freelance work—over 30 percent of U.S. workers—it’s no surprise to learn retirees are getting in on the action. In fact, by 2020, 40 percent of the workforce is expected to be part of the gig economy, or “eschewing or supplementing the traditional ‘nine-to-five’ career with independent or temporary work,” according to a new report from Betterment.
But making a living in this nontraditional way can present financial challenges. For instance, gig work can make it difficult to save for retirement, as most of these workers don’t have access to employer-sponsored 401(k) plans or other retirement savings vehicles.
To better understand the scope of “giggers’” finances, Betterment surveyed 1,000 Americans ages 25 and up who are doing freelance work, and detailed the results in Gig Economy Workers and the Future of Retirement.
Key findings of the report include:
Gigging is the New Retirement Plan: For many respondents, the gig economy is replacing how they plan to earn income in retirement.
- 16 percent plan on having gig economy jobs to supplement their retirement
- 12 percent of side-hustlers will keep a side-gig job as their main source of income after retiring from their traditional career
- One in five full-time giggers say they’ll continue to pick up incremental work in the gig economy as their main source of income following “retirement”
The Gig Economy is a Debt Economy: More than half of gig economy workers turned to this new way of working for financial reasons, not just for the freedom and flexibility it provides.
- A third of traditional workers who do gig work on the side are doing so to save for retirement
- However, 81 percent of all gig workers cite debt as the reason they can’t afford to prioritize saving for retirement
Being Tech-Savvy Doesn’t Translate to Finances: Giggers are often tech-savvy by nature, but they aren’t necessarily using technology to manage personal finances.
- 59 percent of respondents use a digital platform for their job
- Yet only 19 percent use a digital platform for saving
- Just 28 percent use one for online investing
“The emergence of the gig economy has changed the American workforce, and the way we save for retirement needs to change with it,” Jon Stein, CEO of Betterment, said in a statement. “At Betterment, we’re helping investors prepare for this shift by providing solutions that go well beyond simply low-cost IRAs, by lowering costs and making investing accessible for everyone.”
Most importantly, “It’s time for lawmakers to do the same by introducing a modern framework that gives non-traditional workers financial stability for the future,” he added.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
