April 25, 2016 – A growing number of workers are participating in non-traditional, freelance or contractor style jobs, a trend that’s being referred to as the gig, or 1099, economy. According to the New York Times, the number of Americans participating as workers in the gig economy grew by 9.4 million between 2005 and 2015—larger than the overall rise in employment. Not all of those people are out on the road driving ubers—“alternative work arrangements,” also include working as a temp, as a musician (who often get paid per “gig”) or through websites like craigslist. In 2015, this described about 15.8% of the American workforce.
While participating in the gig economy offers many benefits—most notably independence and flexibility—there’s also a big downside: in most cases, workers don’t have access to an employee sponsored retirement plan. According to a 2015 General Accounting Office report, non-traditional workers are about two-thirds less likely to have access to an employer-provided retirement plan. The same may be true of people who only have a part time job, or are balancing multiple part time jobs. “Contingent workers”—a term that describes part-timers and contractors–made up 40% of employed workers in 2010, according to the General Accounting Office. In many cases, workplace retirement plans are only available to employees who are working full time, which is typically 35 hours or more per week. According to the White House, “fewer than 10 percent of workers without access to a workplace plan contribute to a retirement savings on their own.”
It’s a problem that hasn’t been fully addressed in today’s workforce economy, but some companies like Honest Dollar, a startup based in Austin, Texas, are trying to find solutions. Honest Dollar offers retirement plans that employers can offer to contractors that allow them to have set amounts deducted from paychecks. Ride-sharing service Lyft recently signed up with Honest Dollar to offer retirement options to its 110,000 drivers.
If you don’t have access to a retirement plan through your work, there are still a number of ways to save. A great option that became available starting in 2015 is the myRA. MyRA, short for “my retirement account,” was developed by the U.S. Department of Treasure specifically for people without access to a traditional 401(k). It is both convenient and affordable: there are no start-up costs or fees, and unlike most IRAs, there is no minimum contribution or balance. You can also withdraw the money you put into the account without tax or penalty. Furthermore, since it is not associated with the employer, you can keep the same account between multiple jobs. Check out WISER’s myRA fact sheet for more details and information on how to sign up.
Another option for sole proprietors who don’t have any employees is to set up a private, one-person 401(k). These are similar to employer provided 401(k) plans, and are sold by many retirement plan companies under the names, “Solo 401(k)”, “Solo-k”, or “Uni-k”.
If you are one of the many workers who does not have access to a retirement savings plan through an employer, do not make the mistake of avoiding savings altogether. The extra initiative it takes to sign up for a retirement plan on one’s own should not be a deterrent. Plans like myRA make it especially easy to save, and the payoff is well worth it!