“Many freelancers and other self-employed Americans plan to continue working even after they retire—and many of them will have to, because they’re not saving nearly enough to live on while retired, according to the findings of a new study recently released by the nonprofit Transamerica Center for Retirement Studies (TCRS).”
The idea of retirement appears to be a lot less pressing for self-employed workers. They enjoy the flexibility that self-employment offers. They also like being their own boss.
Think Advisor’s recent article, “Many Self-Employed Americans Aren’t Saving Enough for Retirement: Transamerica” reports that 62% of self-employed Americans plan to continue working while they’re retired. Just 26% of the self-employed are “very much” looking forward to retirement, according to the study, “Self-Employed: Defying and Redefining Retirement.” In addition, 68% of self-employed individuals believe that they will work beyond age 65. This includes 40% who anticipate retiring after age 65, and 28% who never plan to retire, the study said.
The number of self-employed people who plan to keep working in their retirement years is unexpected. However, the self-employed may have a false sense of security. They may be overly optimistic about the number of years they’ll be able to keep working or that their business will be viable. For them, retirement could well begin sooner than planned or expected.
Many of the self-employed aren’t making the required preparations for their retirement. While most of the self-employed are saving for retirement to some extent, many are either not saving enough or not saving at all. About half (55%) are consistently saving for retirement, but 30% are saving infrequently. However, a “concerning” 15% say they never save for retirement.
Of the self-employed, 16% said they’d either taken a loan or early withdrawal from a retirement account. Of those individuals who said they weren’t saving for retirement, 20% said they’d done this.
The total household retirement savings among the self-employed is $71,000 (estimated median). However, few self-employed are saving in tax-advantaged retirement accounts, so they may be missing out on an opportunity. Just 31% are saving in a traditional or Roth IRA. About 70% expect income from Social Security, and 54% from other savings and investments. A mere 40% expect retirement income from typical retirement accounts like 401(k)s, 403(b)s, or IRAs.
The study on the self-employed was part of the 19th Annual Transamerica Retirement Study, which was based on a 25-minute, online survey among a nationally representative sample of nearly 6,000 adult workers.
Reference: Think Advisor (July 29, 2019) “Many Self-Employed Americans Aren’t Saving Enough for Retirement: Transamerica”
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