Advice for the Gig Economy on Retirement

Mark Miller, a journalist who writes about financial matters surrounding aging and retirement wrote a nice piece today  called "Retirement in the Gig Economy".http://www.wealthmanagement.com/retirement-planning/retirement-gig-economy  He discussed how Uber has a partnership with Betterment,https://www.betterment.com/why-betterment/ a fintech company that optimizes returns for investors through technology-enabled smart rebalancing and global diversification.  For Betterment it is a lead generation play, for Uber it is a way to deflect attention from the no benefits independent contractor issue, by providing some elective options.

He also mentions Honest Dollar, another fintech player that developed specialized retirement products for clients. One of those enabled  clients who engaged independent contractors to offer those contractors access to retirement products (IRAs, SEP IRAs etc.)  directly through its platform by a deduction from their fee payments. Goldman Sachs bought Honest Dollar in March, because they are "revolutionizing the retirement industry" by appealing to small businesses and gig workers.

Another firm in the space is Ubiquity,  a San Francisco based “fin tech” firm that is focused on providing retirement vehicles for small business and sole proprietorships, or as their website says, the “other 40 million”https://www.myubiquity.com/educate/. The company has their own version of an individual 401K, which they call a “single (k)”.  It has a flat fee and can be set up online. A single(k) enables an independent to make a larger contribution to retirement then would be allowed in a typical IRA or Roth IRA.

These firms are important for gig workers to know about, because they are providing solutions in today's environment.  What is more exciting are the opportunities that may come tomorrow. With very little fanfare, the Senate Finance Committee unanimously recommended Senate Bill 3471, The Retirement Enhancement and Savings Act. (RESA) The bill would enable a pool of employers to contribute to retirement programs.  No action was taken by the 2016 Congress, but given the support for the measure, there is an expectation it will be taken up in 2017.

That would bode well for other efforts that are underway for pooled employer programs.  New legislation  is expected to be introduced in New York state in this year. Handy, a digital platform for handymen and household workers, along with Tech NYC, a New York state trade association, is introducing a portable benefits bill Gig Economy workers. http://www.villagevoice.com/news/uber-but-for-benefits-ny-tech-companies-propose-a-gig-economy-solution-9517993 The proposed voluntary program envisions a 2.5% fee paid by participating companies into a benefits fund. Workers could access the fund to purchase benefits, whether health insurance or pensions.  The catch, according to some, is that the bill defines the workers as independent contractors, effectively cutting these gig workers off from employment benefits like overtime.  The bill’s proponents point to the need for incremental progress toward the goal of improving the social safety net.

Little steps can help.  As the saying goes, a journey of 1000 steps begins with one.

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