The nation’s current retirement system isn’t working for the growing number of nontraditional workers. Freelancers, sole proprietors, contingent faculty, and gig workers represent an important share of the workforce, but they usually don’t have access to workplace retirement plans and as a result many have little savings.
On Nov. 4, a virtual panel of experts from The Pew Charitable Trusts and the University of Massachusetts Boston discussed the results of a survey of nontraditional workers’ interest in six approaches to boosting their retirement savings. Speakers included John Scott, Pew’s project director for retirement savings; Alison Shelton, a senior officer at Pew; and Christian Weller, professor and chair, Department of Public Policy and Public Affairs, University of Massachusetts Boston, and a senior fellow at the Center for American Progress.
The Pew presentation showcased findings from its mid-2020 survey of 1,000 nontraditional workers. Pew conducted the survey to learn more about these workers’ demographic and job characteristics, how the COVID-19 pandemic had affected their lives, the challenges they face saving for retirement, and their interest in different retirement savings proposals. The survey provided the basis for a series of research papers.
Notably, the survey found that just 22% of nontraditional workers have a retirement plan on the job. At the same time, two-thirds said they wanted a plan and 78% said they participated when offered a plan. Nontraditional workers struggle with other barriers to saving for retirement as well, such as low and variable incomes and variable expenses. Few have substantial retirement savings balances in individual retirement accounts (IRAs) or in 401(k)s with a current or past employer. The survey also found that 40% of nontraditional workers had seen their hours reduced or lost their jobs during the pandemic. Coordinating retirement savings with a spouse or partner who has a retirement plan can help, but it is not a solution for most of these workers. The questions also helped measure nontraditional workers’ understanding of financial concepts. Pew presented findings from most of these earlier reports at a webinar in November 2021.
The recent program focused on nontraditional workers’ reactions to six proposals for retirement savings plans. Experts have championed all the proposals in the survey: automated transfers from the worker’s bank to an IRA, saving through tax filings, the use of third-party savings apps or websites, plans managed by a trade or representative body, pooled employer plans, and automated state savings programs. Several states offer these auto-IRA programs for private sector workers who lack retirement savings benefits at their jobs. Workers are automatically enrolled in a state-facilitated IRA program and make regular contributions via payroll deductions. The programs are completely voluntary and workers can choose to opt out or change their contribution levels at any time.
For some of the options in the survey, additional questions probed how frequently the worker would like to save and whether automatic enrollment changed workers’ responses. Nontraditional workers gave each proposal more positive than negative responses. But each also generated substantial uncertainty, with 20% to 40% of respondents saying they weren’t sure whether they would participate. And the prospect of automatic enrollment did not affect—positively or negatively—support for savings approaches. Workers were about as likely to support the two options in which they would be enrolled automatically as they were to support those in which they would opt in. Workers also wanted to maintain access to their savings before retirement, suggesting the need for emergency savings accounts alongside retirement-focused initiatives.
Weller highlighted his research showing that most people of color have much lower retirement savings than White workers. These non-White workers are less likely to have access to retirement savings, receive less help from employers in saving for retirement, and face greater risks during their careers, he said. All three of these concerns are issues in nontraditional work, but the adverse effects may be more widespread among people of color.
The nation’s workforce is incredibly diverse so there is no one-size-fits-all solution. Nontraditional workers also vary greatly in their savings preferences and needs. They work in jobs ranging from freelancing to sole proprietorships to gig work, and get paid in different ways. Bringing retirement savings options to these workers will require innovation as well as education and outreach.
Alison Shelton works on The Pew Charitable Trusts’ retirement savings project.
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