January 30, 2020
A Cost in Retirement of No-Benefit Jobs
Only about one in four older Americans consistently work in a traditional employment arrangement throughout their 50s and early 60s. For the rest, their late careers are punctuated by jobs – freelancer, independent contractor, and even waitress – that do not have any health or retirement benefits.
Some older people are forced into these nontraditional jobs, while others choose them for the flexibility to set their own hours or telecommute. Whatever their reasons, they will eventually pay a price.
The Center for Retirement Research estimates their future retirement income will be as much as 26 percent lower, depending on how much time they have spent in a nontraditional job. During these stints, the issues are that they were not saving for retirement or accruing a pension and may have had to pay for health care out of their own pockets.
The researchers estimated the losses in retirement income to these workers by comparing them with people who have continuously been in traditional jobs with benefits. The workers in their analysis were between the ages of 50 and 62 and were grouped based on how their careers had progressed. The groups included people whose careers were primarily traditional but were interrupted by periods of nontraditional, no-benefit work, and people who spent most of their time in nontraditional jobs.
This last group lost the most: they had accrued 26 percent less retirement income by age 62 than the people who consistently held a traditional job. Who are these workers? They are a diverse mix that includes people who dropped out of high school and are marginally employed and people who are married to someone who is also employed and has benefits. …Learn More
August 13, 2019
Fewer Contingent Workers Seek SSDI
The vast majority of so-called contingent workers – think Lyft drivers, AirBnB hosts, independent contractors, consultants, and freelancers – have built up the work history necessary to apply for federal disability benefits if they become injured.
The 86 percent coverage rate for contingent workers in their 50s and early 60s is less than the 92 percent for regular workers – but not by much.
Despite their relatively high rates of eligibility, however, older contingent workers are significantly less likely to end up on Social Security Disability Insurance (SSDI) than similar workers in traditional jobs, according to a new study by the Center for Retirement Research.
This finding is mainly driven by contingent workers’ lower application rates for SSDI. Applications are lower even for people with the physical, cognitive or emotional conditions that the government explicitly lists as SSDI-eligible.
“Even the contingent workers who need SSDI the most are less likely to apply for and be awarded benefits,” the researchers said.
They offer a couple reasons for the lower application rates. One reason might be that contingent workers would get less in their disability checks than workers with traditional jobs receive, because the benefits are based on earnings – and contingent workers earn an average $592 per month less than other workers.
A more compelling explanation is that they simply lack access to the natural avenues for learning about the program’s existence and their potential eligibility: unions, fellow employees, and a traditional employment arrangement. For example, private-sector employers often require people on their payrolls to apply for federal SSDI before receiving the company’s disability coverage. Contingent workers outside of this kind of arrangement are rarely covered by any employee benefits, let alone private disability insurance. …Learn More
June 11, 2019
Self-employed Lose Some Social Security
Self-employed and gig workers who fail to report all of their earnings to the federal government will pay a price: a smaller monthly Social Security check when they retire.
Gauging the magnitude of this problem is tricky since the IRS doesn’t know how much is not being reported by a group of workers not easily identified in the available data. As a first step, new research derived estimates of the unpaid self-employment taxes that result from the under-reporting, using a combination of U.S. Census data on the workers’ incomes and past studies on the prevalence of the problem.
Specifically, the researchers found that more than 3 million self-employed people – construction contractors, small business owners, and other independent contractors – did not disclose some or all of their earnings to the IRS in 2014. This under-reporting translated to unpaid self-employment taxes of $3.9 billion to Social Security and another $900 million to Medicare.
An additional 2.3 million Americans sell goods and services on platforms like Airbnb, Lyft, and Etsy every month. A large share of these gig workers are not reporting all of their income either. Their under-reporting resulted in an estimated non-payment of $2 billion to Social Security and $500 million to Medicare in 2014.
In fact, the estimates are conservative, and the true level of the missing payroll taxes is probably larger, said the study’s authors, a tax expert at American University and a private policy consultant.
Independent contractors are most likely to be baby boomers over 55, while Generation Xers are more common on the online platforms. Self-employed people fail to disclose earnings for a couple of reasons: they are confused about the tax law or they want to increase their disposable income. But responsibility also falls on the platform companies that process payments for their workers and sellers, the researchers said, because the companies are not required to file 1099 earnings forms with the IRS for a majority of their workers.
Whatever the reasons for the underreporting, self-employed workers will one day get less from Social Security. This study raises an obvious question for future research: how much less? …Learn More