The gig economy generally is viewed as those workers who are independent from an employer and who work jobs that are intended to be part-time. This environment consists of independent, temporary workers ranging from lawyers, accountants, doctors to construction, transportation and personal service. Many gig economy workers may not be aware that they can participate in a solo 401k plan even if they perform such work on a part-time basis.
Bureau of Labor Statistics
A 2017 survey by the Bureau of Labor Statistics (BLS) put contingent (jobs not expected to last more than one year) workers in 2017 at 3.8% of total employment and alternative employment arrangements (e.g., contractors, on-call workers, temp agency workers) at 10.1% of total employment.
Federal Reserve Board
A survey by the Federal Reserve Board late in 2017 estimates 31% of adults were engaged in gig work (defined as occasional work or side jobs, including nontraditional activities: offline services, offline sales, and online services) in the month before the survey.
Upwork and Freelancers Union
The 2017 study by Upwork and the Freelancers Union estimates that 36% of the U.S. workforce are freelancers. This study takes a very broad approach to include anyone who has engaged in supplemental, temporary, project-based work and contract-based work within the past 12 months. The study also predicts that if the current growth rate continues, more than half of the U.S. workforce will be freelancers (if even on a small scale) by 2027.
Retirement Account Solution: Solo 401k Plan
Those in the gig economy are not covered by a retirement plan at work so they may want to consider opening a solo 401 plan. A solo 401k plan is owner-only version of a 401(k) plan. It is ideal for gig workers looking to make high annual contributions in lucrative business years. It allows for higher contributions than SEP and SIMPLE IRAs, for example. Pretax, Roth and voluntary after-tax contributions can be made to a solo 401k plan. For more on the solo 401k contribution limits, CLICK HERE.
