3 retirement tips for workers in the gig economy

Saving for retirement is an important goal for anyone to stick to, but if you’re unsure what your income is going to be any given month, it can be difficult to set that goal and save consistently.

That’s a challenge faced by millions who, while fully employed, also participate in the “gig economy.” How do you save for retirement as a freelancer, independent contractor, or someone who operates your own side business to supplement their income? You may have an income that’s constantly shifting, which doesn’t always make it easy to budget for daily needs and short-term goals—let alone your future.

If you’re trying to figure out how to save for retirement as a freelancer or on a fluctuating income stream, here are three things to remember.

1. Max out your employer match
If you’re employed full time, hopefully you have access to a workplace-sponsored 401(k) or 403(b) retirement plan. Your first retirement tip is to start contributing to that plan as quickly as possible. If your employer offers any kind of match to your contributions, your primary focus should be to maximize your contributions to make sure you’re getting the most “free money” possible. In 2019, you’re allowed to contribute up to $19,000 in a 401(k) or 403(b), or up to $25,000 if you’re age 50 or older.

2. Do some math to determine future needs
Make sure to set a long-term retirement savings goal. The right number for you can depend on your desired lifestyle and other personal considerations, but a good rule of thumb is to plan on needing to replace at least 70% to 80% of your current income in retirement for at least 18 years, the average length of retirement in the U.S.1 If your annual income varies, replacing a specific percentage of it may be a challenging target to land on, but calculating your average monthly income could help.

Take a look back at invoices, deposits, federal tax forms and other documents to find out how much you made in variable income during the past six or 12 months. This will also allow you to come up with a monthly average of what you may be taking in. Add that to your full-time income. That’s a good starting point for your total income. For a more detailed look at how much you may need to save, use our retirement checkup tool.

3. Treat side income like a windfall
Can you cover all your monthly expenses and still contribute to your workplace retirement plan solely from your full-time job? If the answer is yes, you can consider treating all of your side income as a windfall, similar to an unexpected tax refund or an inheritance, and invest it in your future. If it’s too cumbersome to adjust your workplace retirement plan contribution, you have other options available. Click below to review the details and benefits of two popular choices.
What if you’re fully self-employed?
If all of your income is coming from self-employment, or if you’re not offered a retirement savings plan through your employer, you may need to adjust your strategy to make sure you’re saving for retirement. IRAs and SEP IRAs will still be available to you. The key in this situation is to develop a good monthly budget (don’t forget about setting aside money for taxes), and be sure you’re including retirement saving as part of that budget.

Just like operating your side hustle or freelance business, the extra effort you put into managing your finances can potentially pay off when you think about your retirement goals.
The TIAA group of companies does not provide tax or legal advice. Consult a qualified tax advisor or attorney for specific tax or legal advice.

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1 “Average Retirement Age in the United States,” The Balance, March 12, 2019