U.S. gig economy workers: Gig Workers come up short on their future financial and retirement planning
The big question on many freelance workers’ minds is, How can I retire? More than half (53%) of the gig workers we spoke with don’t feel they have effective access to retirement and savings plans, while two-thirds (67%) say that not having access to retirement plans and other benefits is a key drawback to working independently.
When viewed through a British lens, one of the big questions of the American economy is how the tireless U.S. worker ever manages to retire. It’s been less than a century (1934) since FDR established Social Security as a measure to provide for Americans past their employable years. Here is what President Roosevelt wrote in his message to Congress introducing the proposal:
“Security was attained in the earlier days through the interdependence of members of families upon each other and of the families within a small community upon each other. The complexities of great communities and of organized industry make less real these simple means of security. Therefore, we are compelled to employ the active interest of the Nation as a whole through government in order to encourage a greater security for each individual who composes it . . . This seeking for a greater measure of welfare and happiness does not indicate a change in values. It is rather a return to values lost in the course of our economic development and expansion . . ."
There is so much of interest in this passage that I’m citing it at length. Already by 1934 the U.S. (and other developed Western nations) had lost—to the runaway economic development and expansion of the Industrial Age—the values of earlier days, when the interdependence of families provided security into old age. Roosevelt wanted to do something about economic security in a wage-based industrial economy, and it’s a good thing he did, because now Social Security is such a foundational source of retirement income for an increasing number of Americans.
We’ve been studying the U.S. Gig Economy, which as of 2023 comprises 73.3 million freelancers and is expected to rise to 76.4 million in 2024. Our most recent report, Gig Workers come up short on their future financial and retirement planning, focused on their long-term financial well-being. What we found was a population sorely underprepared for their work life to come to an end: 30 percent of them never expect to retire, while 45 percent don’t expect to retire before the age of 65.
Why is this? Well, though according to the Pew Trusts, gig workers are, on the whole, more financially literate than the average U.S. working population, they have a lot of trouble saving for retirement, or even for a more proximate rainy day. Through surveying American gig workers, our research found that after covering household, transportation, and caregiving expenses, along with healthcare and other insurance costs, people don’t have a whole lot left to save. Gig workers also lack matching funds and an employer’s financial sponsorship to understand and plan for retirement.
Though 46 percent of the freelancers we spoke with value the ability to take on more work and thus make extra money, 29 percent feel that the gig work model has negatively affected their ability to save any of that money. This became especially concerning when we asked them how they plan to fund their retirement—77 percent said they would rely on their own savings.
Two-thirds (67 percent) of the gig workers we talked to told us that not having access to retirement plans and other benefits traditionally associated with a full-time, salaried job was a major drawback to working independently; more than half (53 percent) said that gig work has had a negative impact on their access to retirement and savings plans such as 401k’s and even standard retirement vehicles. Yet they still value the flexibility and independence the model offers.
The gig workers in our study expressed an enormous range of answers to the question, What financial security benefits do you plan to take up soon? Among them: Social Security in 3 years. Saving for the future. Owning [my] own home and vehicle. None. Waiting ‘til 70 for Social Security. Cryptocurrency. Managing my investments with a good financial advisor. I plan to work. And pay off credit card bills. I am increasing my wealth in the stock market. Trust.
U.S. gig workers have to double as their own HR/CFO departments and manage their own long-term financial matters far more conscientiously than their regularly employed W2 compatriots do. They uniquely need to take charge of their own retirement by starting to save as soon as possible, if they’re not saving already. We hope Social Security will be there, but it’s unlikely to be sufficient to cover all retirement needs.
While all of these factors need to be considered, the sheer complexity of this mosaic—as well as the sense, gained through our research, that the financial responsibility of thinking out into the future seems to be too complex a labyrinth for many gig workers to handle—leads us to our own question: What can be done to simplify saving and retirement for gig workers?
As we believe in the power of technology to solve some of society’s thorniest problems, the idea of a simple, app-based, one-stop platform that aggregates all the financial services products gig workers might need becomes very compelling. There are already savings and investment and insurance apps in existence, but like the answers to the financial security benefits question above, there’s a mind-boggling array of them. They’re not necessarily serving freelancers in particular, who urgently need to make saving a habit as soon as possible. From there, starting to make monthly or semi-annual contributions to a dedicated tax-free retirement account would be an excellent next step for them. With the collective know-how out there, we can solve this problem.