More Generation Z workers are taking gig work, but it might
not be their first choice. As a result, financial advisers are crafting their
advice to ensure younger members of the workforce stay on track with their
retirement savings.
A report by Kronos Incorporated, a workforce management and
human capital management cloud provider, found that while 53% of Gen Z
respondents expressed interest in working for themselves, 47% said they were
unwilling to sacrifice the stability of a traditional “9 to 5 job” and 46% said
they would rather have the stable income that comes with a salary job than
flexible hours.
However, industry experts say that, despite these fears,
more employees in this younger workforce are making the leap to gig work due to
concerns about COVID-19. The risk of returning to an office setting amid the
pandemic has made workers want to avoid traditional work environments, and high
unemployment numbers have forced some to consider gig work instead, says Brian
Pirri, partner at New England Investment and Retirement Group.
“We’ve definitely started and will continue to see that
shift,” he explains. “Fewer people today want to go into a workplace in an
office setting, and you see more people working remote or doing contract, gig
work.”
As a result, these workers are leaving their traditional,
employer-sponsored 401(k) plans and, instead, enrolling in accounts such as a
SIMPLE [savings incentive match plan for employees] plans, simplified employee
pensions (SEPs) or Roth individual retirement accounts (IRAs).
Some gig workers might eventually think about starting their
own business. For these workers, Robert Conzo, Certified Financial Planner
(CFP), CEO and managing director at The Wealth Alliance, recommends adding a
traditional 401(k) profit sharing safe harbor for its flexibility. “You are not
handcuffed to the 25 mutual funds that are offered in big corporations,” he
adds. “You can have more flexibility, save more pre-tax, have more access, open
architecture, etc. As an independent contractor, the same plans that I had
access to in the big corporate world are available to me as an individual.”
Still, for workers who are just working for themselves and
serving as freelancers, consultants or gig economy workers, contributing to an
IRA is their only option. “It requires the ability, fortitude and discipline to
save on your own,” says Pirri. “When the plan is there and it’s on you to make
that contribution, it’s tougher to stick to that plan.”
Without a traditional 401(k) plan, these workers miss out on
key features and benefits that could help them increase their retirement
savings, including financial advice. While companies such as Vanguard are
targeting their services at Millennial and Gen Z workers with the addition of
Vanguard Digital Advisor, Pirri says New England Investment and Retirement
Group is currently speaking with its clients’ children on financial and
retirement planing, who are now adults as they enter the workforce.
Micah DiSalvo, chief revenue officer at American Trust,
notes that more financial advisers are tailoring their advice to the Millennial
and Gen Z workforces, especially when it comes to retirement savings. “If you
get someone who is 25 years old, you can make a real impact on retirement,” he
says. “We’re seeing advisers trying to connect on their terms, whether that’s
through technology, social media, education, motivation, it’s all centered
around how advisers can connect and transcend that message to Gen Z.”
Conzo advises gig workers to speak to advisers instead of
determining their financial futures through an online or mobile assessment.
Digital investment advice services such as robo-advisers are popular, but
connecting with a financial expert with years of experience can save these
workers money, he says. “The benefit of talking to a professional with many
years of experience is that they’ve seen the pitfalls of making the wrong
decision,” Conzo argues. “That type of experience blends itself into something
that is very hard to acquire from a virtual medium.”
Instead, Conzo recommends using virtual assistance tools as
resources and not guidance. It would be a mistake if workers only use digital
tools to make their decisions, he adds.
“Advice is much broader and expanding, and it comes from a
place where a CFP sees a lot of the problems in coupling the wrong plan with a
person,” he concludes. “There’s no substitute for a person with many years of
experience in a specialty area like financial planning.”
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