By Brett Arends, MarketWatch
Paramount/Courtesy Everett Collection
At the risk of sounding like Thomas Friedman, who is famous for getting insights from taxi drivers , when I get in an Uber /zigman2/quotes/211348248/composite UBER -5.21% or a Lyft /zigman2/quotes/208999293/composite LYFT -6.65% I often find myself talking to the driver. About the job, the company, the passengers, and so on.
One of the topics that always comes up is money and savings.
I usually ask them what they do about retirement savings plans and tax minimization. And I’ve been stunned by the results.
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So they’re paying way too much in taxes to Uncle Sam. And they’re leaving money on the table. Big time.
And then a research paper comes across my desk from the Center for Retirement Research at Boston College, pointing out that large numbers of workers in late middle age are working in these types of gig jobs, and because they don’t have company plans many of them aren’t saving for their golden years.
It is, naturally, very bad news.
Your 50s and early 60s are a key time to save for your retirement, notes researcher Matthew Rutledge of CRR. The children have flown the coop. College may even be paid off.
Perhaps most important, it’s also the time when so many wake up and realize they are way short of their retirement savings goals. This 15-year period is the last chance to try to catch up and fill in the missing gaps.
As a friend recently pointed out to me, there’s now a giant cognitive dissonance in the American jobs market. We’re being told more that entitlements are unaffordable and we’re going to have to work till we’re 70 or older. On the other hand, workers get laid off at 50 because, well, the idea that “ageism is illegal” is a giant joke. The law is hardly ever enforced. Baby boomers (mostly now in their 60s or older) are handing over the reins to their millennial children (40 and younger). Gen X, as usual, is just being X-ed out.
If everyone is going to be laid off at 50, but required to work until 70, an obvious mathematical problem arises.
I guess we could just freeze people in carbonite for 20 years. Otherwise, they’re going to be driving Ubers, selling homemade tchotchkes on Etsy /zigman2/quotes/202790087/composite ETSY +3.37% , and doing other self-employed “gig” jobs.
At which point, their best financial friends are going to be the Self-Employed or SEP IRA, and the solo or Self-Employed 401(k). But most of them, apparently, don’t know these exist.
Solo 401(k)s “definitely should be on a gig worker’s radar,” says Robin Giles, a financial adviser at Apex Wealth Management in Katy, Texas. “I feel the solo 401(k) (especially) offers huge benefits, but is drastically underutilized by the self-employed.”