Freelance, Gig, and Other Nontraditional Workers Face Difficulties Saving for Retirement

Millions of Americans work in nontraditional jobs, as freelancers, sole proprietors, contingent faculty, or gig workers, for example. Their economic situations tend to be as diverse as their work; their income levels vary from well-paid consultant jobs to low-wage hourly jobs. But many face great obstacles to saving for retirement or the prospect of not being able to retire at all.

On Nov. 16, The Pew Charitable Trusts hosted a virtual panel to discuss ongoing research about the particular issues facing nontraditional workers as they struggle to keep their bills paid and save for their futures. The ranks of these workers are growing; estimates of nontraditional workers in America’s workforce vary widely, ranging up to about 40%. To better understand the challenges they face saving for retirement, Pew in mid 2020 surveyed about 1,000 people working in such nontraditional jobs. The results provided the basis for a series of research papers.

The expert panel discussed foundational issues including the degree to which nontraditional workers access retirement plans, the barriers they face to saving, whether coordinating with a spouse or partner can help, their retirement savings balances, and the impact of COVID-19 on nontraditional work.

Speakers included John Scott, Pew’s project director for retirement savings; Alison Shelton, a senior officer for retirement savings at Pew; David John of the Brookings Institute and senior strategic policy adviser at AARP; and Cy Richardson, senior vice president of the National Urban League. Gary Mottola, research director of the FINRA Investor Education Foundation, acted as the moderator. The Financial Industry Regulatory Authority, known as FINRA, helped sponsor the survey through its educational foundation.

The experts offered insights into the various issues facing this critical sector of the nation’s workforce. For example:

• Nontraditional workers face enormous barriers to saving for retirement, primarily insufficient income to cover household expenses and emergencies. That leaves little or no money for long-term savings. Asked if there is a conflict between emergency savings and retirement savings, AARP’s John noted that state-sponsored programs that automatically enroll workers without workplace savings options in individual retirement accounts (IRAs) “have the virtue of allowing participants to do both.” States should explore establishing emergency savings accounts with automatic enrollment, he said. “That’s where you get the participation.”
  
  The research shows that financial precarity is an obstacle to saving for retirement, regardless of income patterns, race, or education. Richardson of the National Urban League underscored the importance of providing nontraditional workers with options that boost their ability to make decisions, calling this “step one toward economic empowerment.”
• Less than one-quarter of nontraditional workers save through an employer plan, primarily because they lack access. Pew research has also found that for gig and other nontraditional workers who do not have workplace plans, access to retirement savings through a spouse or partner’s plan often is not a viable option to ensure retirement security.

The experts also discussed the difficulties facing nontraditional workers in a gig economy. Gig work holds a growing place in the overall economy, stemming from the boom in app and web platforms such as Uber, Lyft, Etsy, and Upwork. Although these platforms allow more households to participate in the economy, they also severely limit access to the retirement savings opportunities similar to those provided to employees in more traditional workplaces. “How do we offer nontraditional workers what others have for retirement savings?” asked Richardson. He said that retirement programs or plans that offer access to nontraditional workers should be a primary part of the solution.

The discussion previewed policy solutions, with the emphasis on nuanced approaches to better meet the needs of these workers. Speakers noted that:

• Because the population of nontraditional workers is so diverse, there isn’t a single solution that can get them on a path to save for retirement.
• To address the conflict of whether workers can save for emergencies as well as retirement, state auto-IRAs have allowed workers to withdraw money without penalty when necessary, while continuing their payroll deductions so they rebuild their savings.
• The biggest obstacles could be finding ways for workers to easily sign up for such programs if they are not automatically enrolled, as many in more traditional jobs now are. “We need an easy way to get people enrolled,” said AARP’s John.

Forthcoming reports from Pew will further explore survey results that show how nontraditional workers view specific policy proposals.

Download Alison Shelton’s presentation that details findings of the Pew survey, or watch the full event video below.

John Scott directs The Pew Charitable Trusts’ retirement savings project.