According to a new report, the rise of the gig economy is fundamentally changing the way Americans work and with it ushering in a new way of retiring.
Whether they are full-time gig workers or part-timers (or "giggers" and “side-hustlers,” as the report calls them), many reportedly do not feel they can save enough for retirement and are turning to gig economy jobs to supplement or even replace traditional retirement savings, explains Betterment’s inaugural 2018 report, “Gig Economy and the Future of Retirement.”
In particular, nearly 40% of respondents feel unprepared to save enough to maintain their lifestyle during retirement and, of those who currently work as full-time gig workers or side-hustlers, 16% plan to supplement their retirement income with gig economy jobs.
The report defines full-time gig workers as those who rely on independent work and/or temporary contracts as their main source of income, while side-hustlers are defined as those who supplement a traditional full-time job with an independent or temporary position.
A third of side-hustlers cite a lack of retirement savings as the reason they have a second job and, the closer they get to retirement age, the more likely they plan to use their gig job to save for retirement, the findings show:
- Under 35 (42%)
- 35-54 (65%)
- 55+ (76%)
Moreover, when they reach retirement age, many expect to keep their gig jobs:
- 20% of full-time gig workers plan to continue picking up incremental work in the gig economy as their main source of income following “retirement”; and
- 12% of side-hustlers will keep a side gig job as their main source of income after retiring from their traditional job.
Yet, while employees with a traditional job are getting gig economy jobs to make up for gaps in their retirement savings, full-time gig workers appear to be unprepared for their financial future. For those where a gig job is their main job, 57% have less than $5,000 in accumulated savings. But the survey’s findings don’t appear much better for those with a full-time job and side gig. For these respondents, 47% have less than $5,000 saved.
When broken down by age, Millennials and Boomers display the starkest differences in their retirement outlook. Perhaps not surprisingly, Millennials are more confident in their ability to save, while Boomers nearing retirement have accepted that they’re going to fall short of savings goals, the report notes.
Meanwhile, despite gig workers’ greater tech savvy, the report also notes that there’s a “major disconnect” when it comes to the way they are saving, as many gig workers are saving in cash versus saving with the help of an automated tool. According to the findings, 42% store cash at home, while 19% use an automated savings tool or app to save money and 35% deposit automatically to savings.
“Technology in the form of on-demand gig apps or freelance websites has enabled an entirely new workforce, yet giggers don’t turn to technology for savings or investing with the same frequency they do for finding jobs,” the report states.
At the same time, however, nearly half of gig workers report that they are investing leftover income on a regular basis, and those who do appear to embrace digital tools, instead of seeking out personal financial advisers. The findings show that gig workers are more likely to use self-managed funds (36%) or rely on an automated financial advising platform (28%) rather than meet with a wealth manager in person (20%).
A total of 1,000 respondents 25 years and older, living in the U.S. completed the online survey conducted Feb. 1-7, 2018; 500 have a full-time job as their primary source of income as well as income from a gig job, while 500 rely on gig economy jobs as their primary source of income.
