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Encouraging Retirement Saving in the Gig Economy

Contributed By Jodie Norquist, CIP, CHSP

Was your dinner delivered to your front door last night or have you gotten a lift to the airport lately by using one of several app-based companies, such as Uber or Lyft? 

If so, welcome to the gig economy, where “side hustles” are no longer relegated to the sidelines but can be a way of life for many workers. A gig worker is commonly defined as anyone who earns income outside of the standard employee/employer relationship. They could include a self-employed entrepreneur, a freelancer, or a short-term contract worker. The nonstandard work arrangement, or “gig,” might be project-based, intermittent, or temporary.  Finding gig employment can be done by conventional advertising, word-of-mouth from past clients, but increasingly it is happening through online computer applications, or “apps.”

While the gig economy emerged before the coronavirus pandemic, the financial uncertainty since 2020 appears to be fueling the growth in gig workers. According to a 2021 Pew Research Center study, 16 percent of Americans have earned money from an online gig platform. When the numbers are broken down by age ranges, individuals in the 18-29 age group and the 30-49 age group are more likely than older generations to have online side hustles. 

According to the study, 

  • 30 percent of 18- to 29-year-olds,
  • 18 percent of 30- to 49-year olds, 
  • 3 percent of 50- to 64-year olds, and 
  • 7 percent of seniors age 65 and older have earned money through an online gig platform.

Of the gig workers who reported earning money on these platforms over the past year, 31 percent said it was their main job, while 68 percent reported that they were earning money as side hustles. Six out of 10 respondents said the money they earned through gig work had been important or essential for meeting their basic needs.

While gig work offers flexibility, a lack of benefits and inconsistent income can pose a serious challenge for gig workers who wish to save for retirement. Without a steady paycheck and an employer contributing to a 401(k) plan, will they be able to set or to meet long-term savings goals? 

The challenge is, how do you encourage them to save? 

First, find out what they need. Gig workers may be more willing to save if they know they can access their money when necessary. Flexibility is important. They may need flexible contributions and the ability to dip into their retirement savings without incurring early distribution penalty taxes. They are tech savvy and want online access to education resources and their own financial information. They may not be able to drop into a branch office during regular business hours to make a transaction. 

Your clients may have chosen to become gig workers because they are entrepreneurs. Perhaps they are following their passion, or maybe they need the work flexibility for family or other personal reasons. They also could be bridging the gap between full-time employment opportunities. Whatever the reasons, they have decided to take an unconventional career path, and a traditional savings approach may not suit their needs. 

Find ways to build digital connections. Connect with clients on social media. Feed them interesting topics that they may relate to and encourage them to act if they haven’t already developed a long-term savings plan. Help them discover what savings vehicles may be most appropriate for them at this stage in their lives. You are a trusted resource for your clients. When you build education into your website, this demonstrates your industry expertise.

Retirement Savings Solutions That Offer Flexibility 

Many gig workers may not be familiar with retirement plan options, or they simply don’t know where to begin. They may need some guidance in navigating the savings products on the market to determine what fits best for their situation.

The following retirement savings plans provide gig workers the opportunity to save in tax-advantaged accounts and give them the flexibility to decide how much they can afford to contribute each year.

Individual(k) Plan™

Also known as an owner-only 401(k)plan, an Individual(k) plan™ is a low-cost 401(k) plan. It allows for larger contributions in good business years, including pretax and after-tax Roth deferrals. Total contributions (profit-sharing contributions, salary deferrals, and after-tax contributions) for each individual cannot exceed the lesser of 100 percent of eligible compensation or $61,000 for 2022; individuals age 50 or older may increase this limit to include up to $6,500 as a catch-up salary deferral contribution. 

SEP Plan

A simplified employee pension (SEP) plan is less complicated than an Individual(k) plan, but offers a similar flexibility for larger contributions during good business years. SEP contributions are made to Traditional IRAs. Individuals may contribute up to the lesser of 25 percent of eligible compensation or $61,000 in 2022. 


SIMPLE IRA plans are another good option, but tend to be less flexible than other types of retirement plans. For example, a SIMPLE IRA plan may not be amended or terminated midyear. Individuals may defer up to $14,000 for 2022, plus an additional $3,000 if age 50 or older. A three percent matching contribution can also be made to individuals who make salary deferrals, or a two percent nonelective contribution can be made, regardless of whether an eligible individual makes a salary deferral. 

Traditional and Roth IRAs

If a gig worker has enough eligible compensation, he can contribute to an IRA. IRA contribution limits are lower than employer plan contribution limits—$6,000 in aggregate in 2022, plus a $1,000 catch-up contribution if 50 years and older. Individuals may be able to deduct their Traditional IRA contributions, or if eligible, they may choose a make a nondeductible Roth contribution that may be distributed tax-free later on. If a Roth IRA distribution is qualified, all distributed assets (not just the contributions) are tax-free. If a distribution is nonqualified, some of the assets (generally the earnings) may be subject to regular income tax and a 10 percent early distribution penalty tax unless the Roth IRA owner qualifies for a penalty tax exception. The possibility of taking tax-free Roth IRA distributions may appeal to those individuals who find it necessary to dip into their retirement savings to pay for unexpected expenses.

Health Savings Accounts (HSAs)

Many gig workers may have high deductible health plans (HDHPs) in order to have lower premiums. If so, they may be eligible to open a health savings account (HSA). An HSA can be used to pay for qualified medical expenses now or in retirement. HSA savings can also be used to supplement retirement income as more HSA owners take advantage of its triple tax advantage of tax-deductible contributions, tax-deferred growth, and tax-free distributions.

While gig workers may choose a nontraditional employment route on the road to retirement, they will still need to save along the way. Fortunately, there are many ways for them to invest and grow their nest egg and retire well.