Self Employed Retirement Savings Habits

D Ameritrade SELF-EMPLOYED RETIREMENT SAVINGS HABITS Most self-employed people aren't saving enough for retirement (if they plan to save at all). Today, there are more than 10 million Americans who call them WORLD'S WORLD'S BEST BOSS selves boss.' Since 2001, the number of self-employed individuals BEST BOSS has increased by more than 14 percent.' America has always had an entrepreneurial spirit, but recent survey results from 2001 ...... NOW TD Ameritrade raise a startling question about retirement savings Number of self-employed Americans habits: are self-employed people betting too much on the future? 14% Why people choose self-employment Survey respondents chose self-employment over traditional employment for a lot of reasons, but the top two are flexibility and passion. 57% The freedom to work when and how I want to 46% Wanted to be my own boss 39% The chance to work on something that I was passionate about or interested in 34% Saw a business opportunity that I wanted to pursue 31% Gave me a sense of accomplishment 24% 30% Wanted to make more money 24% of self-employed 27% Wanted to make better use of my skills and knowledge members of Gen Y fall into this category 23% Wanted to see if I could succeed on my own 20% Gave me a sense of adventure and excitement 21% 20% Didn't like or didn't expect to like traditional employment - 21% of self-employed Baby Boomers fall into this category MIP I lost my job 16% I couldn't find traditional employment 20 40 60 80 100 Every job has its challenges Self-employed people report facing more monetary challenges than their traditionally employed peers, who cite more emotionally oriented challenges in their top five. Self-employed Traditionally employed 33% 61% d 24% 31% Affording good health care Gaining Having to follow a set routine or set advancements coverage Unpredictable income working hours or promotions 26% 23% Not being able to fully pursue areas of work that I'm most Stress of being responsible for most or all aspects of my business interested in 31% 36 26% Increasing revenue and/or profitability Saving for retirement regularly or to the extent that I would like Saving for retirement regularly or to the extent that I would like 21% Finding time to truly relax without business interruptions or worries How they save for retirement Self-employed people report being significantly less likely to be saving regularly for retirement, which may put them at more risk of being unprepared down the road. Self-employed Traditionally employed Have a fixed amount deducted 30% from their paycheck on a regular basis 8% 53% Only about 30% of people who save regularly have a retirement savings goal in mind: Get paid, then personally set aside a fixed amount 15% 10% for retirement on a regular basis Get paid, then personally set aside a variable amount 10% $1 million for $725K for 14%* traditionally employed self-employed on a regular basis Don't regularly save, but save what they can afford, when they can afford it 40% 7 in 10 self-employed 12% people aren't saving regularly (if at all) Do not currently save 28% 10% for retirement at all 29% 32% & of self-employed of self-employed Generation X Generation Y aren't currently saving for retirement at all! According to a separate survey? by TD Ameritrade, Baby Boomers who made consistent contributions to their retirement accounts were more financially prepared for retirement than those who didn't contribute to their accounts regularly. Key challenges of saving for retirement While saving for retirement can be a challenge for anyone, the self-employed people surveyed are more likely to have had to cut back on or pause their savings sometime along the way. 83% 83% of self-employed individuals who are currently saving for retirement have had to cut back or pause at one time or another 70% 70% of traditionally employed people who are currently saving for retirement have had to cut back or pause at one time or another Vs. REASONS WHY SELF-EMPLOYED PEOPLE PUT SAVING FOR RETIREMENT ON HOLD: Expenses related to building up my business Lack of steady employment 26% 28% Health care Paying off major debts (not including a mortgage) expenses 24% 31% Education expenses 23% Lack of 52% steady income 17% 3% Mortgage 8% 5% Divorce Eldercare expenses expenses > Other major expenses Retirement income sources Savings, Social Security and pension payments top the list of ways self-employed people surveyed plan to pay for retirement, but outside income such as inheritance and spouses' retirement funds also play a part. 59% 49% Working and saving money before retirement Social Security and government pensions 38% 25% 23% 22% A spouse or partner's retirement funds Investments (not real estate, IRAS or 401(k)s) Real estate IRA investments investments 19% 19% 17% OPEN Profits from my business, which will keep running Investments in a 401(k), 403(b) or other employer- sponsored retirement An inheritance that my spouse, my partner after retirement or I will receiving 14% 10% FOR SALE The sale of my business when I retire A pension plan associated with work (not including 401 (k)s or IRAS) O 3% ? 1% Other Don't know RETIREMENT What they look for in a retirement savings plan Self-employed savers look for a retirement savings plan that fits their needs, is easy to set up and is easy to contribute to. Self-employed Traditionally employed 42% 36% 33% 58% Fits their Easy to Easy to make Offered by circumstances set up contributions an employer 28% 19% 47% Allows for Offers the Automatic ability to make pre-tax contributions irregular deductions contributions from paycheck Retirement savings plans: knowledge vs. usage While the self-employed people surveyed may be aware of their retirement savings plan options, significantly fewer are actually using them. The No. 1 method of retirement savings is a traditional savings account. Traditional IRAS Roth IRAS SEP IRAS 33% 32% use 13% use use 34% aware 73% 72% aware aware Individual 401(k)s Annuities 11% use 47% 8% use 44% use traditional 47% savings accounts to save for retirement aware aware SIMPLE IRA Defined benefit/ Other pension plan 4%° use 4% use 9% use 36% 21% aware 36% aware aware Alternatives to help you get underway: There are a variety of tax-favored retirement plans for the self-employed: Savings Incentive Match Plan for Employees (SIMPLE) IRA Individual 401(k) Simplified Employee Pension (SEP) IRA Profit-Sharing Plan A plan for self- employed individuals or small business owners with no employees other than a spouse A plan that accommodates A plan for individuals and small business owners businesses with A plan that allows employees and employers varying profits and contribution schedules to contribute D Ameritrade 1. Economic Modeling Specialists, Characteristics of the Self-Employed Report, http://www.econ omicmodeling.com/2012/07/18/characteristics-of-the-self-employed. 2. TD Ameritrade Holding Corporation's Baby Boomer Survey was conducted online between October 10 and 12, 2012, by Head Research. TD Ameritrade Holding Corporation's Self-Employment and Retirement Survey was conducted online from September 25 to October 6, 2013, by Head Research. Complete survey me odologye be found at http://www.amtd.com/newsroom/research-and-story-ideas. TD Ameritrade Holding Corporation (NYSE:AMTD). TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2013 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission. Brokerage services provided by TD Ameritrade, Inc., member FINRA/SIPC/NFA. TD Ameritrade does not provide tax advice. Investors should consult with a tax advisor with regard to their specific tax circumstances. %24