As individuals look for more work flexibility or employers turn to freelancers and consultants, the so-called “gig” economy is growing, and a lack of benefits for these employees could mean a potential financial crisis when they are ready to retire.
According to T. Rowe Price’s second annual survey focused on workers participating in the gig economy, 56% of independent workers are actively saving for retirement (excluding independent workers who identify as already retired), significantly less than the percentage of traditional employees that are doing so (72%). This may be due to the fact that the majority of traditional workers use their employer-sponsored retirement plan (68%) and likely have access to the automatic savings features typically available in those plans, while independent workers are primarily using IRAs (40%).
However, independent workers are just as likely as traditional workers to feel they are financially prepared for retirement (49% and 47%, respectively). In addition, just over half of both independent and traditional workers envision working part time or independently in retirement.
Despite the concerns that a lack of retirement benefits can cause, independent workers say that working on their own has made them more involved in their finances, which is especially true with Millennials. For the second consecutive year, the majority of independent workers say they are much more or somewhat more involved in their finances as a result of working independently (75%), with Millennials more likely to say this (85%) compared to Gen Xers (73%) and Baby Boomers (71%).
“Without the safety net of being able to save for retirement through an employer-sponsored plan, independent workers have to make active decisions about their retirement,” says Stuart Ritter, senior financial planner at T. Rowe Price. “So, it’s encouraging to see that many of them are making the effort to save and that this proactive financial behavior extends beyond just saving for retirement.T. Rowe Price sponsored the online national survey, conducted by Beacon Research, from January 24, to February 16, 2019. The findings are based on a national sample of 2,010 adults ages 22 to 73. The survey report is here.