The Self-Employed Are Defying Retirement While Overlooking Essential Preparations

Only 26 percent of the self-employed are “very much” looking forward to retirement according to findings from Self-Employed: Defying and Redefining Retirementa new study released today by nonprofit Transamerica Center for Retirement Studies® (TCRS).

“The self-employed are enjoying life. Given the autonomy and flexibility in their work situations, the concept of retirement is less relevant to them and not necessarily something they aspire to,” said Catherine Collinson, CEO and president of Transamerica Institute® and TCRS.

The survey of 755 respondents explores the retirement outlook of individuals who are primarily self-employed. The survey’s sample comprises respondents who indicate that full-time or part-time self-employment best describes their employment. Forty-seven percent are sole proprietors and 27 percent own a business that employs others. Among the 26 percent who are freelancers, only nine percent participate in an internet platform or app.

Retiring (or Not Retiring) on Their Own Terms

“Unfettered by employers that can profoundly influence when and how they will retire, the self-employed have a strong vision of retiring on their own terms. Many intend to work beyond traditional retirement age, while others have no intentions of ever retiring,” said Collinson. Sixty-eight percent of the self-employed are planning to work past age 65, including 40 percent who expect to retire after age 65 and 28 percent who do not plan to retire. Moreover, 62 percent plan to continue working in retirement.

Among the self-employed who expect to retire after age 65 and/or continue working in retirement, their reasons for doing so are more often healthy-aging related (83 percent) than financial (73 percent). The most often cited reasons are to be active (59 percent), keep their brain alert (56 percent), enjoy what they do (54 percent), and want the income (54 percent).

The majority of the self-employed (74 percent) envision either continued work or a gradual transition into retirement, including 28 percent envisioning working as long as possible, and 46 percent thinking they will reduce their work hours or work in a different capacity that is less demanding and/or brings greater personal satisfaction. Only 11 percent of the self-employed plan to immediately stop working when they retire.

Retirement Savings of the Self-Employed

“Whether or not they intend to retire, the self-employed should financially prepare themselves for a time when they will no longer be working. Unlike employed workers with steady paychecks and employer-sponsored benefits, the self-employed must take a do-it-yourself approach to preparing for retirement,” said Collinson.

Most of the self-employed are saving for retirement to a greater or lesser extent, with 55 percent consistently doing so, and 30 percent saving from time to time. A concerning 15 percent say they never save for retirement.

Total household retirement savings among the self-employed is $71,000 (estimated median). The research finds that relatively few are saving in tax-advantaged retirement accounts, which suggests they may be missing out on an opportunity. Only 31 percent are saving in a Traditional or Roth IRA.

The self-employed expect diverse sources of income when they retire. Seventy percent are expecting income from Social Security, and 54 percent from other savings and investments. Of note, only 40 percent expect retirement income from typical retirement accounts such as 401(k)s, 403(b)s, or IRAs. Since the majority of the self-employed plan to work in retirement, it follows that 38 percent expect income from working. Among business owners (sole proprietors and those who employ others), 49 percent expect income from their business and 17 percent expect income from the sale of their business.

Read the full release at PR Newswire.