A recent survey of gig workers underscores the impact of independent work to retirement savings, and the long-term effects that surface when savings are put on the back burner.
The report, released by the Legal and General Group, surveyed 1,044 gig workers, finding that over half (53%) do not believe they have effective access to retirement and savings plans. Instead, 77% of gig workers surveyed say they would rely on their own personal savings to fund their retirement, while 73% anticipate Social Security to be their main source of retirement income. Forty five percent do not anticipate retiring before age 65, with 30% expecting to never retire at all.
The report notes the expenses gig workers must already cover—from rent or mortgage to transportation, healthcare, and other costs. As a result, many barely have funds available to save for retirement. Without the help and benefits from an employer, most are left to fend for themselves as their own CFO.
“Despite cultural differences, after covering household, transportation, and caregiving expenses, along with healthcare and other insurance costs, people don’t have a whole lot left to save,” found researchers. “The situation is the same, if not more dire, for gig workers, who also lack matching funds and an employer’s financial sponsorship to understand and plan for retirement.”
More than half (53%) of the workers surveyed consider the freelance work model to have a negative impact on their ability to access retirement and savings plans, followed by 48% who believe the same about health insurance. This rang truer for women, with 71% saying they have no access to retirement plans and listing benefits as the worst aspect of gig work.
The findings prove even more troubling when most workers believe they would not be able to provide for themselves or their loved ones without their independent work. Thirty-four percent of those surveyed said they would be able to continue to support their family if they could no longer work. Additionally, a setback of only one month due to an accident or illness left one in five feeling they’d be able to survive financially and 66% confident that they could handle it.
The research notes that while self-employed workers have access to individual retirement accounts (IRAs), roth IRAs, and other savings vehicles, they don’t have connections to financial advice, employee benefits, or even time — all key, critical entry ways to kickstarting short- and long-term savings.
Yet, what they do have the advantage of is financial literacy. A 2022 Pew research report found gig workers tend to hold higher financial literacy than the general American population. Where gig workers stray, however, is at the absence of financial planning, lack of access to retirement savings plans, and often, their youth, finds Pew research.
“The current reality for U.S. gig workers is that, yes, in addition to doing the work itself, they do have to double as their own HR/CFO departments and manage their own long-term financial matters far more conscientiously than regularly employed W2 workers do,” said researchers at Legal & General Group. “They uniquely need to take charge of their own retirement by starting to save as soon as possible, if they’re not saving already.”
The study points to new fintech developments and solutions as one key area where freelancers can begin saving, noting that most gig workers are already financially savvy. This can include investment apps that automatically store incremental amounts to savings, or those that provide affordable insurance offerings.
Additional findings from the study can be found here.
SEE ALSO: