Coming up short: 77% of gig workers plan to fund retirement from their own savings

More than three-fourths of U.S. gig workers expect to rely on their own savings for the bulk of their retirement income, while three in 10 say they never will retire.

“The situation with American freelance workers is a call to action for the financial services industry,” said Sir Nigel Wilson, CEO of Legal & General Group. “By harnessing financial technology, we should be able to do a better job of delivering a user-friendly suite of products and services that make it easy for gig workers to put a retirement plan in place. The tools and intelligence are there — this is more a problem of communication than innovation.”

Although gig workers have higher levels of financial literacy than average Americans, they find that retirement planning poses a particularly difficult challenge, according to recent research by Legal & General:

• Two-thirds said not having access to retirement plans and other benefits is a key drawback to gig work.
• More than half said gig work has a negative impact on their access to retirement and savings plans.
• 45% don’t expect to retire before age 65.
• Nearly three in 10 believe gig work has negatively affected their ability to save for an emergency.

The challenge is even greater for women. The biggest worry expressed by female gig workers was their long-term financial future, with 71% saying that having no access to retirement plans and benefits was the worse thing about gig work. They also earn on average one-third less than male colleagues. The pandemic also took a greater toll on women. Nearly half said it had a negative effect on the income, compared with 39% of men. More than twice as many women (7%) as men (3%) expect to receive less than $1,000 a month in retirement.

Related: 2023 employee benefits & workplace predictions: The gig workforce

The recently enacted SECURE 2.0 Act offers little help. Self-employed workers and independent contractors are completely left out, as are all state-level auto-IRA programs, because they rely on sign-ups through employers, said Siavash Radpour, associate research director for the Retirement Equity Lab at The New School’s Schwartz Center for Economic Policy Analysis.

One of the biggest hurdles for gig workers is having to take on responsibilities that an employer otherwise would handle for them.

“The overriding sense among the gig workers with whom we discussed long-term financial security was one of stress,” the survey report said. “Too many things to take care of, to keep track of, to pay for.”

The report offered several suggestions to help improve the retirement outlook for gig workers.

“We wonder, can financial services for gig workers somehow be simplified?” the report asked. “Fewer, not more, products. How about a suite of only the essential products designed for the gig worker? A savings account, life insurance and long-term care insurance. And who would pay for them? Maybe create an add-on in their fee structure so whoever is paying the freelancer for their work would in essence be matching contributions, at least to a degree.”