Innovative Retirement Savings Solutions for the Gig Economy

Innovative Retirement Savings Solutions for the Gig Economy

Indiana Lee 28/11/2023 1
Innovative Retirement Savings Solutions for the Gig Economy

The gig economy has fundamentally transformed the way people work, offering flexibility and autonomy that traditional nine-to-five jobs often lack.

A staggering 14 million American workers report being part of the gig economy.

That means 14 million people in the U.S., alone, might not have access to traditional, employer-sponsored retirement plans. What’s more, they may not know that they have any other options. 

The changing workforce has allowed for strides to be made in this particular area. Innovative retirement options are available for people without traditional careers. The trick is learning how to implement them safely and effectively which safeguards your future.

Why Gig Workers Should Save for Retirement

5 Retirement Trends To Watch Right Now

Typically, employers provide retirement plans for employees. These involve employer matching of contributions in a pension plan or 401(k). 

It’s worth it to look into how to save for retirement, regardless of where you work or how you work. As you age, you’ll want to have the following to fall back on: 

  • Extra money for hobbies and life enrichment; 

  • Medical insurance

  • Feasible housing options. 

Luckily, there are ways to reap the benefit of retirement funds sans traditional employment. Examples of some long-term investments you should consider regardless of age and type of employment include: 

  • Certificates of deposit (CDs);

  • High-yield savings accounts;

  • Real estate;

  • Roth individual retirement accounts (IRAs);

  • Treasury bonds;

  • Target-date funds.

These are traditional investments that you can contribute to regardless of employment status. There are different requirements for each, such as annual income limits. Make sure to check what is available for your specific situation.

Alternative Retirement Solutions

Some of the more antiquated types of investments for retirement may seem daunting, particularly if you haven’t started saving yet. However, there are creative ways to catch up on retirement savings

  • Passive income, like property investment or stocks; 

  • Paying your self-employment social security taxes;

  • Reducing spending;

  • Setting up an automatic savings plan;

  • Spousal benefits.

Saving for retirement can start at any point and come in a variety of different forms. You’re already earning a living creatively. Look into how to revolutionize how you save for retirement with the following modern options.

Specialized Retirement Plans and Platforms

Specialized retirement plans tailored to the needs of gig workers have emerged as a vital response to the evolving nature of work in the modern economy. These innovative plans recognize the unique challenges faced by freelancers, independent contractors, and individuals engaged in gig work who often lack access to the traditional employer-sponsored retirement benefits enjoyed by full-time employees. These specialized plans offer gig workers the flexibility to contribute to their retirement savings on their own terms, accommodating the irregular income streams that are characteristic of gig work. 

Some of these retirement savings plans tailored specifically to self-employed individuals include: 

  • Health Savings Accounts (HSAs): Accounts where individuals can contribute a portion of income to a dedicated healthcare fund that can also supplement a retirement fund.

  • Individual(k) plans: Similar to a 401(k) but without employer contribution at a lower cost, and with benefits like higher contribution options during more profitable years.

  • Simplified employee pension (SEP) plans: A contribution to a traditional IRA up to a certain limit, like 25% of your income or $61,000 as of 2022.

  • Simple IRAs: Also known as a Savings Incentive Match plan, a contractual account that allows for government matching up to a certain percentage and tax deferral of income until withdrawal.

By combining user-friendly digital platforms with a diverse array of investment options, these plans empower you to take control of your own financial future despite the inevitable uncertainties and fluctuations in self-employed income.

Portable Benefits

Much like gig workers are portable, portable benefits offer a solution that transcends traditional employment structures. These benefits are designed to travel with the worker, allowing you to accumulate retirement savings and other essential perks irrespective of job changes or shifts in employment status. Portable benefits can be transferred from a former employer to your new situation in the gig workforce, so this only applies if you have had a career with retirement benefits in the past.

Freelancer Cooperatives

With the rise in popularity of gig work, you’re not alone in your savings endeavors. Comprising a collective of independent professionals from various fields, cooperatives unite freelancers under a shared umbrella, most notably allowing you to pool resources and knowledge. These cooperatives create a platform where freelancers can collaboratively address the challenges associated with planning for retirement in an often unpredictable income environment. By leveraging the collective strength of the group, members can negotiate for better retirement benefits, access to retirement plans, and financial education resources that might otherwise be elusive as individual freelancers. Through shared knowledge and experience, you can make more informed decisions about retirement savings, investments, and long-term financial planning. 

Secure 2.0 Government Match Programs

Proposed to take effect in 2027, Secure 2.0 is a government-backed plan for lower-income gig workers. With a qualified retirement account, you could be eligible for federal matching at a maximum of 50% up to $2,000. This is a step in the right direction for equalizing the playing field for gig workers in the retirement sphere.

How To Implement Solutions Effectively

How to Minimize Your Taxes on Retirement Income

Implementing innovative retirement options effectively as a gig worker requires a proactive and adaptable approach. As the nature of work evolves, you must embrace the available tools and resources to build a stable retirement foundation. Begin by thoroughly researching and selecting the most suitable retirement platform or cooperative that aligns with your financial goals and preferences. Leverage the flexibility of these options to contribute consistently, even if the income is irregular, adjusting contributions during periods of higher earnings. 

Engage with the educational resources provided by these platforms to enhance your understanding of investments, risk management, and long-term financial planning. Collaborate and network within freelancer cooperatives to collectively negotiate for better retirement benefits and access to comprehensive financial guidance. By consistently contributing, staying informed, and fostering connections within the gig economy community, you can effectively navigate the unique challenges and opportunities presented by innovative retirement options — ultimately securing a more financially resilient future.

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  • Jack Towarnicky

    Jack Towarnicky
    Wow, 14 MM. Did you know that every one of those individuals has had access to a more than adequate retirement savings plan for the past 42 years? The Individual Retirement Account.

    Median tenure of American workers has been less than 5 years for the past 7 decades. That means, a "typical" worker will have 12+ employers prior to reaching age 50 ... and one or more likely offered a retirement savings plan.

    The easiest solution to this "coverage" opportunity/challenge is to prompt the IRS and DOL to adjust guidance for a tax code provision that has been in place for over 20 years - the Deemed IRA. With adjustment, plan sponsors of 401k and 403b plans might add those features to their existing plan, allowing a gig worker to direct a portion of their net pay (paycheck splitting) to the Deemed IRA account at a former employer's plan.

    Simple, clean, efficient - as all electronic banking should be.

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Indiana Lee

Content Writing Expert

Indiana Lee is a writer, reader, and jigsaw puzzle enthusiast from the Pacific Northwest. She is an expert on business operations, leadership, marketing, and lifestyle. 

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