The Gig Economy and Retirement
We are in the midst of a major economic shift. Today’s workers often rely on gig work, either as a full career or to supplement income from a traditional job. One disadvantage is the lack of employer-sponsored retirement accounts. According to a recent report by Betterment, seven out of 10 full-time gig workers say they are unprepared to maintain their current lifestyle during retirement, while three out of 10 say they don’t regularly set aside any money for retirement.
5 Steps to Retirement Savings for Gig Workers
- Assess your current financial status: Determine how much you have saved in your checking, savings, and neglected retirement accounts, as well as any cash on hand. This will give you a clear picture of your current financial reality.
- Open a retirement account: If you don’t have an existing retirement account, set one up immediately. Consider an IRA, specifically created for individual investors, or a Roth IRA, whose contributions are made after taxes, allowing for tax-free retirement distributions.
- Choose low-fee asset allocations: Gig workers often have less money to invest, making it crucial to minimize investment fees. Consider index funds, which are constructed to mimic a market index and typically don’t have management fees.
- Use technology to facilitate saving: Set up automatic transfers to your retirement account, and consider using a savings app like Digit to analyze your account activity and determine safe amounts to save.
- Make the most of found money: Allocate a portion of birthday checks, tax refunds or cash tips to your retirement account, treating them as bonus retirement savings.
