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Freelancers Need Flexible Retirement Options

Small Business Majority
Wednesday, 22 March, 2017

Entrepreneurs create more jobs than any other sector of the economy, and they are at the forefront of an evolving 21st century economy that is shaping America’s new employment landscape—one where brick-and-mortar storefronts are being replaced by online retailers, and freelancers and contractors are the new version of the 9-to-5 office worker. New scientific opinion polling shows these solo entrepreneurs are doing financially well for the most part, but they struggle to access benefits like retirement plans, and a significant number are not saving anything for retirement. As a result, the vast majority support portable and flexible retirement plans. 

Key Findings

Majority of freelancers doing well financially: Only 15% of the freelancers, contractors and temporary employees surveyed say they struggle financially. A 53% majority describe themselves as doing well and 32% say they are “just okay.” Nearly half (48%) earn at least $50,000 a year contracting or freelancing. 

Majority of freelancers say they are doing well financially

Which of the following best describes how well your personal finances are doing?

Despite barriers, freelancers are happy with their career choice: A mere 6% of respondents say they plan to stop freelancing and seek a permanent full-time job. The majority (54%) would continue working as an independent worker/business owner, 12% want to continue freelancing, but seek permanent part-time work to supplement their income, 9% hope to build larger business with more hours and 12% plan to retire in the next few years.

Many freelancers lack retirement savings plan; face variety of barriers to retirement savings: Despite their reports of being financially well, 4 in 10 freelancers do not have an active, formal retirement plan. When citing reasons why they do not have a retirement plan, nearly 4 in 10 (38%) say they do not generate enough income to save, 31% say it’s because they don’t get paid on a predictable basis, making it harder to set aside money, 12% say it’s because plans are too expensive, and 8% say there are no good retirement options for freelancers. 

4 in 10 freelancers have no retirement plan

Which of the following retirement plans do you actively contribute to, not including plans from past employers that are dormant? Please select all that apply.

Losing employer-sponsored benefits was a concern when considering freelancing: More than half of freelancers (52%) say the lack of an employer-sponsored retirement plan was a concern when considering freelancing or becoming a solo entrepreneur. This rivals concern about losing other employer-sponsored benefits like healthcare (54%) and their ability to generate work (63%). 

Lack of retirement savings plan a concern when considering freelancing

Please indicate whether the following items were a major concern, somewhat of a concern, not much of a concern, or not a concern at all when contemplating beginning freelancing or becoming a solo entrepreneur.

Vast majority say lack of retirement savings plan is a drawback of freelance work: Seven in 10 freelancers report that saving for retirement is a concern, with 1 in 3 who say it is a major concern for them. Other financial concerns for the self-employed include the cost of health coverage (74% concerned), the rate of taxation (72%), inconsistent cash flow (67%), having enough income to cover sick days or medical leave (50%) and more.  

Freelancers strongly support portable retirement vehicles: Nearly 8 in 10 (79%) say they are interested in a flexible retirement savings plan that is portable across employers and can accommodate intermittent contributions. This interest jumps to 91% for younger freelancers and to 87% for those who derive more than half of their income from retirement work. When it comes to proposed programs, 83% say a plan that allows you to withdraw without penalty in order to increase your financial flexibility would make them more likely to save for retirement. Other plans that would make them more likely to save for retirement include automatic investment features, such as the ability to adjust investments based on your age (74%) and a plan that includes an automated streamlined process to contribute to a retirement plan during the process of paying quarterly taxes (72%). 

Freelancers strongly interested in flexible and portable retirement plans

How interested would you be in a retirement vehicle that is portable across employers and can accommodate intermittent contributions from you and/or contributions from multiple employers for an individual worker?