The latest monthly employment report from the Bureau of Labor Statistics showed that there were 7.855 million multiple jobholders in the United States in May. In absolute terms that is near the high-end of the historical range but as a share of total employment still very low. For many of these Americans taking on a second job was the natural response to an overall healthy labor market that until recently has been held back by sluggish wage growth. An increased willingness to find a side gig is also not too surprising since the internet, mobile technology, and various other innovations have enabled more people to enjoy flexible work arrangements and discover new opportunities. Further, multiple jobholders on average earn an extra $1,122 per month from their secondary form of employment, according to the results of a Bankrate poll released this month.
For some gig workers there is a risk that these additional earnings are not correctly reported to the government, which could result in a smaller monthly Social Security check in retirement. However, there are signs that such potential downsides are at least being partially offset by good saving habits, especially among younger Americans. Indeed, Millennials in the Bankrate survey were much more likely than members of other generations to say that they have a side gig, and 31 percent of Gen-Y respondents indicated that the funds from their secondary job are being used to boost their savings. Only around one in six Gen-Xers and Baby Boomers said that additional income from their side gig goes towards building a retirement nest egg or emergency fund, and instead the vast majority of older respondents indicated that extra money is used to increase consumption. Even more encouraging, an earlier Capital Group study found that 59 percent of Millennials began setting money aside for retirement before their 25th birthday, much better than the 42 percent of Gen-Xers and 28 percent of Baby Boomers who reported doing the same. A quarter of Gen-Y respondents also said that they believe “children born today should start saving for retirement even before their 18th birthday.”
Despite the constructive attitude and behavior, many Millennials may still not be saving enough for retirement given the myriad of financial challenges this age group will likely have to overcome, e.g. ballooning healthcare expenses, lower Social Security payouts, greater long-term care needs. NerdWallet even estimated that a hypothetical 25-year-old earning $40,000 a year will need to set aside anywhere from 13 percent to as much as 22 percent of his or her annual income each year prior to retirement just to be able to achieve an income replacement rate of 80 percent. The latter is well above the more traditional recommendations for what should be contributed annually to a retirement account and is based on a relatively pessimistic outlook for the stock market. Regardless, under any scenario it is still clear that young adults should start early with their saving and investing and strive to set as much money aside each year as possible. Doing so can help them avoid the need to continue to hold multiple jobs later in life in order to shore up their old-age savings prior to retirement, which sadly is probably the case for the roughly one in five workers ages 55 and older in a CareerBuilder survey who said that they currently have more than one job.
Sources: U.S. DoL, Bankrate, Boston College, Squared Away, Capital Group, NerdWallet, CNBC, CareerBuilder
Post author: Charles Couch