People who are working at jobs they expect to last only a short time still have to think about retirement—but whether they should go through all the aggravation of opening a 401(k) if they only expect their employment to last a little while is a question they may just ignore.
However, in a blog post, U.S. News & World Report suggested that the answer to that question may depend on the answers to some other questions—and a new partnership between Freelancers Union and Honest Dollar seeks to provide a solution for freelancers, whose jobs are of necessity of indeterminate duration.
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The U.S. News report said that one factor to consider when deciding on whether to open a 401(k) at a short-term job is how much you can take with you when you leave.
While any money you contribute is your own, and you can either leave it where it is or roll it over into a new plan, employer contributions aren't—at least not until the company says you're vested. If you leave a job after just a few months, the odds are that some or all of any employer contributions will be forfeited.
Still, if you check into the vesting schedule and find that you will indeed be vested—even partially—by the time you leave, you should contribute enough to get the full employer match.
After all, it's free money. And even if you're only, say, 25 percent vested by the time you leave, if your employer put $1,000 into your 401(k), you'll get to take $250 of it with you when you go. And if the job turns out to last longer than you expected, the move will have paid off even more.
Should you depart before vesting, you have other options rather than a 401(k)—either a traditional IRA or a Roth—that will be easier to deal with when you change jobs.
And then there's Honest Dollar's arrangement for members of Freelancers Union, which allows them to save for retirement via a digital retirement savings platform.
Workers can invest in IRA-based savings programs that provide long-term investment accounts with different tax advantages that go with them wherever they work. They get a discounted rate through Freelancers Union, and can open an account via the Honest Dollar app or website, without paperwork or account minimums.
According to the Freelancing in America report from Freelancers Union and Upwork, 41 percent of freelancers put saving for retirement among their top concerns. But full-time freelancers are less likely to put money into retirement savings than full-time employees.
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