Being self-employed has its perks.
You get to be your own boss. You get to set your own hours. Want a day off? Well, you get a day off.
You can make a decent living doing it, too. According to a poll conducted for Small Business Majority, a national small business advocacy group, 48% of entrepreneurs surveyed said they make at least $50,000 annually and 53% identify as “doing well” or “doing very well.”
In fact, only 6% want to quit freelancing and go back to working full time.
That’s despite the fears most freelancers had before taking the plunge. Those concerns included:
- lacking an employer-sponsored retirement plan (52%)
- losing employer-sponsored benefits like health care (54%)
- their ability to generate work (63%)
According to the survey, retirement is still top-of-mind for many freelancers. Seventy percent reported saving for retirement was either “somewhat of a concern” or a “major concern” for them.
Freelancers Aren’t Prepared to Retire
Yes, freelancers love their lifestyles, but they don’t necessarily plan to work until the day they die. Unfortunately, retirement might be more difficult for freelancers than their friends who work traditional 9-to-5 jobs.
According to the study, 40% of freelancers are not saving enough for retirement. For those neglecting their nest egg, it mostly comes down to income.
Of the freelancers failing to save, 69% of them say it’s hard to establish a formal retirement plan because they either aren’t making enough money or their income varies so widely each month that it can be tough to save consistently.
When answering another poll question, 35% said they won’t be able to retire comfortably unless they find another source of income or increase their contribution to their savings plan.
As for those who are making enough money and feel comfortable putting cash aside, there’s another concern — a lack of retirement savings plans that fit their needs.
What Freelancers Want Out of a Retirement Plan
When it comes to the perfect retirement plans for freelancers, flexibility is key, the study shows.
In fact, 83% of freelancers said they would be more likely to make retirement saving a priority if they had the option to withdraw money without paying a penalty. That would allow for more financial flexibility in a pinch.
In a perfect world, retirement plans would also include automated features that adjust investments based on age and streamline the process of contributing to the plan while paying quarterly taxes.
If either of those options were available, freelancers said they would be more than 70% more likely to save.
When it Comes to Saving, All’s Not Lost
The lack of availability of those options means a sizable portion of gig-economy workers are still not saving for retirement.
But there’s also some good news: 60% of freelancers are actively putting money away for retirement with the options they have now, and the majority are contributing regularly to a traditional IRA, Roth IRA or 401(k) account.
For the freelancers who have been saving, about 16% of them say they could retire today but are still working by choice. Another 25% say they still have some saving to do — but are otherwise on track to retire comfortably.
Getting ready for retirement can be difficult and confusing. But these five retirement options for freelancers can help you start stacking your cash.
Your Turn: Freelancers, have you started saving for retirement?
Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder. She spent 18 months as a freelancer and is sad to admit she was among the 40% not saving for retirement during that time.
The post 40% of Freelancers Don’t Have a Formal Retirement Plan. Here’s Why appeared first on The Penny Hoarder.
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