A report published by the Brookings Institution, “Retirement Plans for Contingent Workers: Issues and Options,” suggests Americans who have embraced alternative work arrangements are still substantially underserved by traditional financial services firms.
According to the white paper, the challenges facing contingent workers can be lumped under two main headings.
“First, conventional retirement saving mechanisms are usually not available to this segment of the workforce unless they are also working as a traditional employee at another job. Thus, they tend to miss out on provisions that encourage retirement wealth accumulation, such as payroll deductions, automatic enrollment, and employer matching contributions,” the report explains. “Of course, anyone with earnings can contribute to Individual Retirement Accounts (IRAs), but only a very small percentage of those without an employer plan do so on a regular basis.”
Second, the diversity of contingent workers means that it is very unlikely that any single approach will be suitable for the entire group. Full and part-time workers are likely to have differing needs, for example, especially if the part-timers are working more than one job.
The paper does argue for a more comprehensive solution that would “decouple retirement saving plans from the employer, so that individuals would have retirement accounts—much like their Social Security accounts—that follow them across employers and across various work arrangements,” but it acknowledges this type of reform is unlikely for the foreseeable political future.
The full white paper, including other specific recommendations for better serving gig workers, is available for download here.