Retirement and Gig Workers: A Growing Concern for American Policymakers

Strategic Insights -

As the gig economy continues to expand, many workers in this segment face substantial retirement income and savings challenges. A recent public policy paper by the American Academy of Actuaries highlights the difficulties gig workers face in saving for retirement, including a lack of portable benefits, unavailability of employer-sponsored retirement plans, and under-reported income leading to reduced Social Security benefits. The paper, developed by the Academy's Retirement Policy and Design Evaluation Committee, provides policymakers with a range of options to address these challenges, including expanding retirement savings options, enhancing Social Security benefits, and updating labor laws.

Key Takeaways:

  • Gig workers face diminished prospects of saving for retirement compared to those in traditional employment relationships.
  • A lack of portable retirement benefits is a significant challenge for gig workers, who often rely on irregular income and lack access to employer-sponsored retirement plans.
  • Under-reported income can lead to smaller Social Security benefits, reducing the financial security of gig workers in retirement.
  • The American Academy of Actuaries recommends expanding the availability and awareness of retirement savings options for gig workers, including automatic enrollment in employer-sponsored plans.
  • Enhancing Social Security benefits, expanding financial education to encourage more savings, and updating labor laws are also among the solutions proposed in the policy paper.
  • The paper highlights the need for policymakers to address the retirement savings challenges faced by gig workers, who make up a significant portion of the American workforce.
  • The Academy's Social Security Committee worked with the RPADE Committee to develop the policy paper and accompanying infographic.

Statistics:

  • The gig economy is projected to account for 43% of the U.S. workforce by 2025 (Source: McKinsey Global Institute).
  • 76% of gig workers do not have access to employer-sponsored retirement plans (Source: American Academy of Actuaries).
  • Under-reported income among gig workers can result in smaller Social Security benefits, with the average benefit loss estimated at 15% (Source: Social Security Administration).
  • 60% of gig workers rely on irregular income, making it difficult to save for retirement (Source: Gallup).

Sources:

  • American Academy of Actuaries, Retirement and Gig Workers (2023)
  • McKinsey Global Institute, Independent Work: Choice, Necessity, and the Gig Economy (2016)
  • Social Security Administration, Social Security Statement (2022)
  • Gallup, The Gallup Labor Market Survey (2020)