Fintech and state-based plans could make retirement savings as easy for independent workers as Social Security, says a report released Friday by the Brookings Retirement Security Project.
“Like Social Security, an account would follow workers from job to job throughout their career regardless of the type of employee relationship,” said the study headed by Project Director William Gale and Deputy Director David John, who also is the AARP Public Policy Institute’s Senior Strategic Advisor.
With an increasing share of the American labor force being made up of independent workers, the need to make employment-based retirement savings easier has become more compelling, the study said.
While the yearly income of independent workers such as Uber drivers varies widely, one characteristic many share is irregular earnings, which makes routine saving difficult.
The Retirement Security Project sees promise in financial technology, or fintech, noting Uber and its competitor Lyft are offering IRAs through Betterment and Honest Dollar, respectively.
“To compensate for irregular payment amounts and schedules, savers can choose to save a preset amount each month, save a percentage of each payment or to only save when a payment is over a certain amount,” the study said.
Gale and John predicted fintech will drive down the costs of getting workers signed up with IRAs and other retirement vehicles and setting up payroll deductions.
The Brookings team said state-based savings programs for private workers could also help independents accumulate money for retirement.
While offering a menu of possibilities, the report said the key is to make retirement savings vehicles for independent workers “employer-facilitated” rather than “employer-sponsored.”
Under the menu, Brookings envisions an employee would have one account with a default investment option and could change providers and investments.