The traditional model of retirement, built around employer pensions, group health benefits, and regular 401(k) contributions, is evolving. Today, more Americans are earning income through freelance work, contract gigs, rideshare driving, and other forms of self-employment, which calls for innovative solutions from financial institutions.

While being part of the gig economy offers flexibility, it also presents unique challenges—particularly in retirement planning and retirement benefits. Without employer-sponsored benefits or steady paychecks, independent workers must take a proactive and informed approach to building financial security.

This article outlines practical strategies for gig workers who want to address retirement savings, healthcare, and income planning in a way that aligns with their work style and financial goals.

The Rise of the Gig Economy

More than one-third of U.S. workers now participate in freelance or gig work in some form. For many, it’s a primary income source. While this shift offers independence, it also means:

• No employer-sponsored retirement contributions
• No group health or disability insurance
• Fluctuating, sometimes unpredictable, income

These conditions make personal responsibility a cornerstone of long-term planning.

Estimating Retirement Needs with Irregular Income

Because income may vary by season or client demand, gig workers benefit from a flexible but consistent approach to saving:

1. Use Long-Term Averages
Rather than planning based on recent months, calculate average income over the past 12–24 months to estimate savings capacity.

2. Save by Percentage, Not Amount
Setting a fixed percentage of income for retirement—such as 15% to 20%—provides flexibility during lower-earning months.

3. Build a Stability Reserve
A 6–12 month emergency fund can help weather fluctuations in income and reduce the need for early retirement withdrawals.

Retirement Savings Options for Independent Workers

Gig workers can take advantage of several retirement accounts designed for the self-employed:

Up to 25% of net income, capped at $69,000 for 2024. However, all your total contributions must be within these limits.

• Up to 25% of net income, capped at $69,000 for 2024
• Contributions are tax-deductible
• Simple to establish

• Solo 401(k)

• Available to those without full-time employees
• Combined employee contributions and employer contributions up to $69,000 (or $76,500 with catch-up if 50+)
• Can include Roth and traditional options

• Traditional or Roth IRA is a good option.

• Lower annual limits ($7,000 or $8,000 with catch-up), with income limits for contributions.
• Roth IRAs allow for tax-free withdrawals in retirement

• Taxable Investment Accounts

• No contribution limits or tax benefits, but allow greater liquidity

Choosing the right account depends on income levels, tax considerations, and long-term objectives.

Managing Healthcare Without Employer Benefits

Healthcare can be a major cost without group insurance. Independent workers should consider:

• Marketplace Plans: May qualify for income-based subsidies
• High-Deductible Health Plans (HDHPs) + HSAs: Can offer lower premiums and allow for pre-tax savings for qualified medical expenses
• Spouse’s Employer Plan: If available, this may be more cost-effective
• Professional Associations: Some offer access to group insurance options

Tip: An HSA (if eligible) provides tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses. After age 65, HSA funds can also be used for non-medical expenses without penalty (though income taxes apply).

Managing Taxes and Cash Flow

Gig workers are responsible for tracking and paying their own taxes, which adds complexity to retirement planning:

• Set Aside Monthly Taxes: Reserving 20–30% of income in a separate account can help avoid shortfalls
• Make Quarterly Estimated Payments: To avoid IRS penalties
• Track Business Deductions: Expenses like equipment, travel, and home office use may reduce taxable income
• Consider Professional Guidance: A tax professional can assist in optimizing deductions and tax planning across variable income sources

Retirement Resilience: An Illustrative Approach

Consider an independent contractor whose income varies between $50,000 and $85,000 annually. They may benefit from:

• Contributing to a Solo 401(k) during higher-income years
• Building an emergency fund to cover months with less work
• Maximizing an HSA for health-related and retirement use
• Collaborating with a financial professional to monitor investment strategy and retirement targets

This approach illustrates how retirement planning can adapt to a flexible work lifestyle—though individual outcomes will depend on many personal factors.

Common Challenges to Address

• Delaying Contributions Waiting for “steady” income may lead to missed savings opportunities. Starting with small, consistent contributions can be more effective., especially when considering planning for potential interaction with the internal revenue service.

• Blending Personal and Business Finances
Maintaining separate accounts helps with tracking and planning.

• Relying on Social Security Alone
While gig workers who report income typically qualify, benefits are unlikely to meet full retirement needs.

• Not Adjusting for High-Earning Years
Capitalizing on stronger income periods can help fill in savings gaps from leaner months.

Why Planning Is Essential for Gig Workers

Unlike traditional employees, independent workers don’t receive automatic contributions or structured benefits like an employer match. They must self-manage their healthcare, taxes, and retirement savings—requiring more diligence but offering more flexibility.

Working with a financial professional may help gig workers:

• Evaluate which retirement vehicles align with income and goals
• Create a strategy for healthcare coverage and HSA use
• Structure tax planning to support long-term savings
• Design a retirement roadmap that evolves over time

How TruNorth Advisors Supports Independent Workers

TruNorth Advisors works with individuals who operate outside of the traditional employment model. We assist clients in evaluating their current financial picture and developing a plan to address income variability, savings strategies, and healthcare expenses over time.

The objective is to help clients make informed decisions based on their own needs, preferences, and financial circumstances.

Conclusion

Retirement planning as an independent worker requires adaptability and foresight. While the path may differ from that of a traditional employee, strategies are available to help support long-term financial stability.

By regularly reviewing income, managing taxes, choosing appropriate retirement accounts, and preparing for healthcare needs, gig workers can pursue a retirement that fits their values and lifestyle.

Disclosure

This material is provided for informational purposes only and should not be construed as investment, tax advice, or legal advice. Resolute Capital, LLC, dba TruNorth Advisors, is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training.