Self-Employed Workers are Messing up Their Retirement with this Serious Money Mistake
People spend a good part of their professional career saving up for a comfortable retirement in the future.
However, a lot of them, especially self-employed workers, might find themselves falling short of their long-term financial goals because of one big mistake they’re making today.
Not Saving Enough
According to a study by the Transamerica Center for Retirement Studies (TCRS), people who work for themselves are failing to save enough money to ensure a comfortable retirement. The report showed that just 55% of self-employed workers say that they save for retirement consistently.
Some 30% of the respondents revealed that they only save from ‘time to time’. Even more shocking though is that 15% of them report not saving at all.
The study surveyed around 6,000 Americans, 800 of whom identified themselves as self-employed.
The TCRS also reports that self-employed people have a median household retirement savings of $71,000. The recommended retirement plan savings amount is about four times what you earn in a year.
One reason why people who work for themselves are facing a savings shortfall is that they plan on working longer than their regularly employed counterparts. This optimistic view of the future is hinged on the flexibility that comes with being one’s own boss.
Self-employed people also don’t experience the same ageism that employees who work for a company might face in the workplace. This gives them the ability to have more control over when they would retire.
However, people who work for themselves might be making another mistake in this regard as it leads to them under-saving for the future and even under-insuring themselves.
According to the same survey, about 70% of self-employed people expect to retire after the age of 65 or continue working beyond that. In contrast, workers often retire around 62 years old in reality.
There also cases when people retire earlier than anticipated due to unforeseen reasons. In fact, four out of 10 Americans reportedly retire early after experiencing health problems or being let go by their employer.
Going in Unprepared
Worse, a lot of people are not prepared at all for these scenarios. According to the TCRS survey, only 23% of respondents had disability insurance while just 81% had health insurance.
It’s recommended that you protect yourself with a disability insurance policy as early as possible because rates increase with age. Doing so would ensure that you have a source of funds when a health issue prevents you from working.
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