Two Reasons American Workers Aren’t Saving for Retirement
We all know how important it is to save for retirement. Most financial planners suggest that we put away somewhere between 10 to 15% of our take-home income, starting in our 20s, to help prepare us for when we’ve aged out of the workforce. Speaking from personal experience, I’m not sure how many of us actually follow those guidelines, but still—historically, Americans have found a way to at least make their retirements comfortable. The real trouble comes when workers don’t have anything saved for retirement.
For the past few weeks, we’ve been looking at the results of Hyperwallet’s Payday in America report, which surveyed 2000 American W2 (employee) and 1099 (contract) workers about their attitudes and experiences with payday. So far, we’ve pointed to two key findings: 1) many American workers live in a state of perpetual financial insecurity, and 2) slow payments to contract workers may be hindering adoption of gig work in the on-demand economy.46% of American workers don’t have any money put away for retirement. Click To Tweet
Today, we’re introducing another major finding: many American workers—including a majority of those primarily engaged in freelance work—aren’t saving for retirement.
According to the Payday in America survey, 46% of American workers don’t have any money put away for retirement. That number skyrockets when we look at 1099 workers specifically: a tremendous 70% of freelancers aren’t financially prepared for the future. This, despite the fact that roughly half of survey respondents have at least two paying jobs—and, of those with more than one job, 38% say it’s to save more money. What gives?
Why Aren’t Americans Saving?
The Payday in America results may actually help us understand why nearly half of Americans aren’t preparing for retirement. First, there’s our financial priorities. In the event of a delayed paycheck, roughly 50% of survey respondents would delay payment on important bills, compared to 40% who would modify their social life and limit associated spending. This suggests that fun sometimes trumps financial responsibility. After all, what’s a late payment fee compared with staying home during a close friend’s party or missing out on that road trip?
The other reason Americans aren’t saving could be the paychecks themselves. This is certainly true for contract workers, who—as we saw last week—are often subjected to unnecessary payment delays and processing fees. A recent exposé from the National Post revealed that some companies utilizing contract workers are “[setting] payment terms where they don’t have to cut freelancers a check for up to 90 days (and that’s assuming an invoice doesn’t get lost somewhere in the accounting process).”70% of #gig workers haven't put away any money for the future. Click To Tweet
For both employees and freelancers, when paychecks come slowly and sporadically, it proves difficult for workers to stick to a set budget that allows them to save for retirement and achieve their financial goals. How can we expect someone to prepare for the future when they don’t even know whether they’ll earn enough—and be paid quickly enough—to cover their rent this month?
Fixing the Payment Process
This revelation, coupled with the other two major findings from the Payday in America report, points to a major failing on the side of employers’ outbound payment processes. Already stretched to their financial limits, the modern American worker is routinely subjected to lengthy payment wait times that leave them in the precarious position of choosing between their current and future well-beings. Do I take that dream vacation or build a safety net? Do I invest in a passion or save for retirement?
For many workers, but especially freelancers, the solution to these issues is often simply a better outbound payment process. Hyperwallet’s comprehensive payout platform gives workers access to their earnings in real-time, so they know exactly how much they’ve earned, when they’ll receive their payment, and whether they can put some of it away for a rainy day. And, with integrated support features like digital tax services and expense management, Hyperwallet helps payees make the most of their earnings.
Help your workers create a secure financial future for themselves. Improve your outbound payment process.