Insecure at Best: The On-Demand Economy, Small Business, and Retirement Security

Abstract

Small businesses – especially sole proprietors – are a large portion of the American workforce. With the explosive growth of the on-demand economy – which creates a number of new self-employed, sole proprietors each day – an estimated 2.5 million new small businesses are expected to be created each year. Yet, saving for retirement as a small business owner and especially as a sole proprietor is a challenge, as only 38.7% of small business owners participated in a retirement plan in 2014. In order to improve the retirement savings of small businesses and the self-employed, this paper identifies the specific challenges faced by small businesses and the self-employed in saving for retirement. This paper finds that: (1) the on-demand economy has greatly expanded the size of the small business workforce and will continue to do so; (2) saving for retirement is a challenge for small business owners, including sole proprietors; (3) despite the numerous types of retirement plans offered to small businesses and sole proprietors, without easier to use products from the IRS and financial service providers, small business owners will continue to lag behind other workers in saving for retirement; (4) small business owners and sole proprietors are not saving for retirement for a variety of reasons; (5) the inadequacy of small business retirement savings can be remedied by policymakers.