Not Saving Enough

One reason why self-employed people fall short on their savings is that they reportedly plan on working longer

According to a report from the Transamerica Center for Retirement Studies (TCRS), a lot of self-employed people are not saving enough money now to live comfortably once they retire. Only a little more than half of those surveyed said they consistently set aside money for their eventual retirement with about 30% saving only from ‘time to time’. Even more concerning is that 15% of these people admitted that they don’t save at all.

Meanwhile, it was found that the median household savings for retirement for self-employed people stand at just $71,000. According to data from the Bureau of Labor Statistics, households run by someone 65 and older spend around $45,756 in a year alone. The TCRS study surveyed 6,000 Americans, 800 of whom are self-employed.

While even regularly employed people still face somewhat similar problems, they do have the fallback of having a workplace 401(k) plan. Fortunately, people who work for themselves can have something like this by setting up an Individual Retirement Account (IRA) and put money into that as well.

A Portrait of the Self-Employed Population

A reported 27% of self-employed people are business owners, who also employ other people

The TCRS' report also shed light on the American self-employed population. Apparently, the segment represents a variety of work arrangements and demographic characteristics. What more, their reasons for being self-employed are also varied.

Six out of 10 of them are men and a little over half are age 50 or older. Meanwhile, less than half of the people who work for themselves are college graduates. It’s worth noting though that almost 30% did attend college or trade school.

Added Risks

Many people also find themselves needing to suddenly retire from working to care for a spouse or another family member

Aside from not saving enough, self-employed people also make the mistake of expecting to retire later than what is actually happening in real life. About 70% of this segment of workers plan on retiring at 65 years old or not retire altogether.

However, four out of ten American workers actually find themselves retiring earlier than they anticipated because of unforeseen reasons. Some of the most common causes of unexpected early retirement are disability or health problems and experiencing changes and downsizing at work. All these said self-employed people aren’t prepared to handle these added risks. According to TCRS, not even have of them have life insurance and only 23% have disability insurance to protect themselves from the consequences of being unable to work due to a disability.