Survey: Self-Employed Neglecting to Save for Retirement

Friday, 24 Jan 2014 06:47 AM

By Dan Weil

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The number of self-employed people is growing, but apparently they aren't doing so well in setting up their retirement finances.

A total of 40 percent of self-employed people aren't saving regularly for retirement, and 28 percent aren't saving at all, according to a recent survey from TD Ameritrade, CNBC reports.

That compares with 12 percent and 10 percent, respectively, for those who are employed by others.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000

The numbers aren't pretty for small-business owners either. A total of 60 percent of them say they aren't saving enough for their retirement in a survey by American Express.

The issue is particularly important because of the growth of self-employment in this country.

From 2001 to 2012, it increased by14.4 percent to encompass 10.6 million jobs and 7.1 percent of the total workforce, according to an Economic Modeling Specialists International report, CNBC notes.

Those who work for themselves as an independent contractor might consider a Simplified Employee Pension (SEP) IRA. You can put in as much as 25 percent of your adjusted earnings — up to $52,000 — in 2014.

Surprisingly enough, a Morningstar study shows that some people may be saving too much for retirement.

"There are three common assumptions that many software tools and financial advisors use to come up with a retirement savings goal — a 70 or 80 percent replacement rate based on pre-retirement income, an income need that rises with inflation, and a 30-year retirement time horizon," David Blanchett, head of retirement research for Morningstar Investment Management, says in a statement.

"When we looked at actual retiree spending patterns and life expectancy, however, we find that these assumptions don’t hold true for many people and, on average, can significantly overestimate how much people will actually need to fund their retirement."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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