We are in the midst of a major economic shift as the economy is headed into the dreaded r word “recession”. Workers in the past could expect to keep a stable job with a traditional employer for decades as company’s offered pensions. However, workers of today have found they must either cobble together a career from a variety of gigs or supplement a lackluster salary from a traditional job by doing freelance work in their spare time.

Though you can make a living (and possibly even a good one) in the gig economy, this kind of work does leave gig workers vulnerable in one very important way: retirement planning. Generally, company’s offer a retirement match such as a 401k or even other helpful benefits like HSA’s (triple savings account) you can withdraw penalty and tax free for health-related expenses.

Without the backing of an employer-sponsored retirement account, many gig workers are not saving enough for their golden years or even enough to have a peace of mind.

Gig employment is getting much more popular as many companies such as delivery service, rideshares, even tutoring are getting more main stream. Here are five things you can do to save for retirement as a member of the gig economy.

1. Account for your Total Assets

Many people don’t have a clear idea of how much money they have and it’s impossible to plan your retirement if you don’t know where you are today. Any retirement savings should begin by reflecting what you already have in your brokerage accounts/ financial institutions.

Add up how much is in your checking and savings accounts, any neglected retirement accounts you may have picked up from previous traditional jobs, cash on hand if your gig work relies on cash tips, or any other financial accounts. The sum total could add up to more than you realize if you haven’t recently taken account of your total assets.

Even if you truly have nothing more than pocket lint and a couple quarters to your name, it’s better to know where you stand than to proceed without a clear picture of your financial situation.

If you don’t already have a retirement account that you can contribute then a good first step is to set one up ASAP. You can’t save for retirement if you don’t have an account to put money in and IRAs defer your tax liability to the future giving your immediate savings so your investments compound.

IRAs are specifically created for individual investors and you can easily get started with one online. If you have money from a 401(k) to roll over, you have more options available to you, as some IRAs have a minimum investment amount (typically $1,000). If you have less than that to open your account, you may want to choose a Roth IRA, since those often have no minimums.

The difference between the traditional IRA and the Roth IRA is how taxes are levied. With a traditional IRA, you can fund the account with pre-tax income. In other words, every dollar you put in an IRA is a dollar you do not have to claim as income on your tax return. However, you will have to pay ordinary income tax on your IRA distributions once you reach retirement. Roth IRAs are funded with money that has already been taxed, so you can take distributions tax-free in retirement.

Many gig workers choose a Roth IRA because their current tax burden is low meaning if you are in the lower tax bracket, it would be wise to pay taxes now and let your investments grow in the Roth IRA. If you anticipate earning more over the course of your career, using a Roth IRA for retirement investments can protect you from the taxman in retirement.

Whether you choose a Roth or a traditional IRA, the contribution limit per year, as of 2022, is $6,000 for workers under 50, and $7,000 for anyone who is 50+ to catch up.

3. Avoid Investment Fees

While no investor wants to lose portfolio growth to fees, it’s especially important for gig workers to choose asset allocations that will minimize investment fees. That’s because gig workers are likely to have less money to invest, so every dollar needs to be working hard for them. These investment fees tend to be hidden on the 1099-B statement, sneaky financial institutions will stick these at the very end and its not even on the summary pages sometimes.

Investing in index funds is one good way to make sure investment fees don’t suck the life out of your retirement account. Index funds are mutual funds that are constructed to mimic a specific market index, like the S&P 500. Since there is no portfolio manager who is choosing investments, there is no management fee for index funds.  

4. Embrace Automation

One of the toughest challenges of being a gig worker is the fact that your income is variable — which makes it very difficult to plan on contributing the same amount each month. You want to set aside a budget plan and this is where technology plays a role.

To begin, set up an automatic transfer of an amount of money you are comfortable with investing that will not affect your needs (food/living conditions). Whether you can spare $50 per week or $5 per month, having a small amount of money quietly moving into your IRA gives you a great start to build upon.

From there, consider using a mobile apps to handle retirement savings for you many financial intuitions offer these as a way to gauge your financial health. For instance, the financial intuitions will analyze your checking account’s inflow and outflow which will determine an amount that is safe to save without triggering an overdraft and automatically move that amount into a savings account. Don’t pay the stupid fees.

5. Invest Now Today

An excellent way to make sure you’re maxing out your contributions each year is to change your view of money. For instance, if you receive a birthday check from your grandmother, only spend half of it and put the rest in your retirement account and forget about it. Similarly, if you receive a tax refund (which is a little less likely if you’re a gig worker paying quarterly estimated taxes), it would be wise to save at least half of the refund toward your retirement.

Any gig workers who often receive cash can also make their own rules about the cash they receive. For example, you could decide that every $5 bill you get has to go into retirement savings. That will help you change your view of the money and give you a way to boost your retirement savings so you can either retire earlier or feel stable.