Uber’s highly anticipated IPO this spring shined a spotlight on ride-hailing driver benefits as compensation strikes took place around the world.
The majority of these workers are considered independent contractors, which precludes them from traditional employee benefits like a 401k. On the heels of this news, Amazon offered a $10,000 incentive for workers to quit their jobs and start their own business delivering Amazon packages. This initiative, if enacted, would create a new pool of independent contract workers who, like Uber drivers, lack or lose access to company-sponsored retirement savings plans.
How can the growing population of independent contractors ensure they’re keeping their retirement savings on track?
Our Founder and CEO, Chad Parks, has been at the forefront of these discussions with respected members of the media. Most recently, Yahoo! Finance turned to Chad for his reaction to the Uber driver strikes. In this article, Chad articulated just how important personal savings is when it comes to funding retirement, especially with Social Security making up a small portion of retirement income.
However, Chad underscored that all hope is not lost for gig economy workers. He outlined three retirement savings plans worth considering:
- Traditional IRA: When saving with a traditional IRA, individuals pay income tax at the time those funds are used. Chad explained that this type of account is generally more beneficial for savers over the age of 40.
- Roth IRA: Conversely, the money invested in a Roth IRA account is taxed at the time of deposit and thus, can be withdrawn tax-free at retirement. According to Chad, individuals under the age of 40 usually benefit more from this savings vehicle by incurring taxes when they fall into a lower-tax bracket. For both traditional and Roth IRAs, the contribution limit for 2019 is $6,000.
- Single 401k: This savings option is also referred to as the Self-Employed 401k, Individual 401k or Solo 401k. It’s a retirement plan specifically designed for those who are self-employed or considered independent contractors. The beauty of this product is that it’s flexible and entrepreneur-friendly. In good years, you can sock away as much as $19,000, which is the annual contribution limit. In leaner years, you aren’t required to save as much. Want to learn more about saving without the 9-5? Meet Ubiquity’s solo savings vehicle: Single(k).
A deeper dive into Single(k) savings
To further explore the benefits of a Solo 401k and how to determine if this plan is right for you, Chad authored an article for Next Avenue, a PBS affiliate. In this piece, Chad answered some of the most common questions regarding Single 401(k) plans and outlined the key reasons to consider participating in them, such as flexible contributions, tax-deferred growth on investments and reduced taxable income for pre-tax salary contributions. For more information on Single 401(k) plans, check out Chad’s piece, which was also picked up by MarketWatch!
Ubiquity Retirement + Savings is committed to providing simple and affordable retirement savings plans to enable small businesses and those in the gig economy to prepare financially for their retirement. We’ll continue monitoring these events and will be sure to keep you updated on the latest legislative initiatives and retirement plan options.