By Levi Sumagaysay
Dean Rainer finds it hard to believe that anyone would think app-based gig workers can save for retirement.
“I needed a good laugh today,” the 60-year-old who delivers for Uber /zigman2/quotes/211348248/composite UBER -3.28% Eats said when asked about his retirement plans. “Thanks for that.”
Rainer estimates that he made about $14 an hour on average doing deliveries about 35 hours a week in Orlando, Fla., before he moved recently to Birmingham, Ala. “It could be lower, but never higher,” he said, citing few tips, high fuel costs and base pay as low as $2 a delivery since he began delivering in March 2021.
“They’ve been two-dollaring me to death,” he said. Because of that, Rainer said he would probably have to work “the full 12 hours a day Uber allows for any type of extra cash to invest in [an] IRA.”
His experience is mostly in line with findings from a report published by Pew Charitable Trusts in the fall, which found that most gig and nontraditional workers have saved little for retirement. While Pew’s survey of about 1,000 workers found that the biggest barrier is lack of access to retirement-savings vehicles, two-thirds of those surveyed said immediate needs and emergencies also keep them from saving for retirement.
Another Pew survey last year of more than 1,300 gig workers found that most of them do the work part-time or to supplement other income. But nearly one-third of those surveyed, or 31%, rely on gig work as their main source of income — meaning they may not have other options for retirement savings.
See also: From treatment of gig workers to tip transparency, the app-based economy could see key changes
That’s the case for Esterphanie St. Juste, a 57-year-old Lyft Inc. /zigman2/quotes/208999293/composite LYFT -4.30% driver in the Los Angeles area. A former real-estate agent, she says she has never had a job where she could save for retirement. She is now looking to make a change.
“There’s no retirement in this job,” she said. “There’s nothing left over by the time you pay your bills and you live, and nothing to save for retirement.”
So she said she is going through an employment-services program in San Fernando Valley, working on her résumé and thinking of taking some classes.
“At this point, it’s a losing proposition,” she said of gig work.
While app-based gig workers must pay taxes that help fund Social Security — in fact, they pay 12.4%, twice as much as those who have employers because they also have to pay for the part employers usually provide — the retirement benefits they may receive would likely need to be supplemented more than others for a variety of reasons. For one thing, experts say, many gig workers tend to earn lower wages.
Read: Social Security recipients are getting a big raise — but also are falling further behind
Also, some gig workers may not be aware that they have to file self-employment taxes because up until this year, companies like Uber, DoorDash Inc. /zigman2/quotes/222973991/composite DASH -10.74% and others did not have to provide 1099-K tax forms to workers unless they had earnings of at least $20,000 a year and 200 transactions, said Caroline Bruckner, a tax professor at American University in Washington, D.C. Under new rules that were part of the American Rescue Plan and became effective Jan. 1, the companies now have to send 1099s to workers who make at least $600 a year.
“If we do nothing else, the most important thing we can do is to convince people to pay their self-employment tax,” said Bruckner, who does research on the gig economy. “Social Security is the easiest way to facilitate some retirement savings.”
Even if gig workers pay their taxes and therefore pay into Social Security and Medicare, some experts warn about the long-term implications of millions of independent workers who aren’t setting aside additional money for retirement.
“Based on our studies, we will have a nation filled with older people without anything to supplement their Social Security income,” said Teresa Ghilarducci, a labor economist, expert on retirement and professor at the New School university in New York. “By the time they reach 62, they will only have Social Security to rely on and their living standards will fall.”