Ask self-employed workers about retirement savings, and a shocking number give exactly the same answer: "What retirement savings?"
The potential consequences are scary not only for them - the nation's growing ranks of entrepreneurs, freelancers, consultants and contractors - but also for the United States as a whole. With more and more people without regular jobs and the benefits that come with them, the nation faces a retirement time bomb.
New data from TD Ameritrade Holding Corp reveals the worrisome state of the retirement savings of independent workers. The brokerage company's Self-Employment and Retirement Survey found that 28 percent of the self-employed were not saving anything at all, and another 40 percent were only saving occasionally, when they said they were able.
At the same time, the ranks of U.S. freelancers, contractors and temp workers are growing every year - to an estimated 40 percent of the workforce by 2020, according to a study by software company Intuit, and up from 30 percent in 2006, according to the Government Accountability Office.
"This is going to be a huge problem," says Jonathan Medows, a Manhattan certified public accountant who specializes in helping freelancers with their finances. "They are already struggling to pay their bills, and then there are all the additional costs like overhead, like quarterly estimated taxes, like medical care. And cash flow can be so inconsistent that it is very challenging to budget."
Until a few years ago, saving was not on the agenda of New York City disc jockey Herbert Holler (real name Ken Hyman). Early in his career, he says, "I was single, living on the Lower East Side, going out every night and living day-to-day."
But now Hyman is 37, with a wife and a young daughter. Despite intermittent paychecks, lack of company-sponsored 401(k) plans and matching contributions - plus additional cost burdens like health insurance - he and his wife are maxing out their annual Roth individual retirement account (IRA) contributions.
"Freelancers have to find a way to save," Hyman says, "or we're all going to be in a lot of trouble."
Even though the U.S. retirement system has not really been designed for them, freelancers must take responsibility and drastically up their retirement saving using the investment vehicles most appropriate for them.
If you are that rare freelancer with a big profit margin at the end of each month, then a Simplified Employee Pension Individual Retirement Account (SEP-IRA) is a golden tool, advises Denise Kiernan, co-author of "The Money Book for Freelancers, Part-Timers, and the Self-Employed."