understanding the financial challenges unique to self-employed … · 2016-01-15 · 2. table of...

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Understanding the Financial Challenges Unique to Self-employed Americans

Self-employment Survey

2

TABLE OF CONTENTS

RESEARCH METHOD 03

KEY FINDINGS 04

BECOMING SELF-EMPLOYED 06

CHALLENGES OF RUNNING A SMALL BUSINESS 15

IMPACT OF TECHNOLOGY 22

THE CHANGING BUSINESS CLIMATE 28

FINANCIAL ADVICE 40

SAVING FOR RETIREMENT 44

APPENDIX 58

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This survey was conducted by Head Solutions Group on behalf of TD Ameritrade Holding Corporation1.

The statistical margin of error for the total sample of N=1,505 American adults within the target group is +/- 2.5 %2. This means that, in 19 out of 20 cases, survey results will differ by no more than 2.5 percentage points in either direction from what would have been obtained by the opinions of all target group members in the U.S. Sample was drawn from major regions in proportion to the U.S. Census. Generations used in this report are defined according to the Pew Research Center. Millennials (born 1981 to 1997, ages 18 to 34 in 2015), Generation X (born 1965 to 1980, ages 35 to 50 in 2015) and Baby Boomers (born 1946 to 1964, ages 51 to 69 in 2015)3. 1 Head Solutions Group (U.S.) Inc. and TD Ameritrade Holding Corporation are separate, unaffiliated companies and are not responsible for each other’s products and services2 Assumes survey participants are the same as non-participants3 http://www.pewresearch.org/fact-tank/2015/01/16/this-year-millennials-will-overtake-baby-boomers/

Note: Percentages may not add up to 100 due to rounding.

New England

7%

Mid-Atlantic

15%

South

20%

Southwest

11%

West

22%

1,505 self-employed American adults

OnlineSurvey

September 29th to October 9th

2015

Average time to complete survey:

15 minutesHead Solutions Group on behalf of TD Ameritrade

Holding Corporation1

45% Male

55% Female

Midwest

25%

WHENWHATWHO

CONDUCTED BY

Research Method

4

• The business climate is perceived as unfavorable: 6 out of 10 self-employed say the business climate is moving faster now than 3 to 5 years ago

• Three in 10 self-employed businesses have been hurt by the fast moving pace of change:

• Profits are decreasing for one quarter (28%)• Cost of business has increased for one in three self-employed

(32%)

• Recent government policies have hurt businesses of self-employed Americans who say that:

• The effect of government regulations has become worse (27%)• Rising healthcare costs have reduced their ability to save (26%)

• Over 6 in 10 (64%) do not believe that small businesses will be part of the next President’s top 5 priorities

• Reducing healthcare costs is the most desired Presidential priority for half (51%) of self-employed

Key FindingsSelf-employment is a rewarding employment choice for many Americans, but can come with a personal and financial cost. In the last 3 to 5 years many have seen the costs of running their business go up, profits decrease and their ability to save for retirement impeded, leaving many self-employed Americans far behind with their savings goals

• Six in 10 (61%) self-employed are anxious about saving money for retirement and over half (55%) feel they are behind with their retirement savings

• Half (48%) say that unpredictable income and too many personal expenses (38% all, 49% Millennials) are the main barriers to regular saving for retirement

• Six out of 10 (59%) are not making regular contributions to their retirement savings

• Although they are behind in their retirement savings, 6 out of 10 (57%) of self-employed expect to fund their retirement with their own savings while half (51%) expect to rely, at least partially, on social security to fund their retirement

• If, once they reach their intended retirement age, they do not have enough money to fund their retirement, continuing to work is plan B for most self-employed (76%)

• As they are facing the challenges of saving for retirement, it is concerning to see that only 3 in 10 (28%) report having received professional financial advice in the past 12 months. Half of those not receiving advice (53%) prefer to rely on their own expertise or do not believe that professional advice would be helpful (25%)

Self-employed Americans say that their businesses are hurting, and they don’t expect that political or economic developments, or a new President, will help them

The business and political climates are impeding self-employed Americans’ ability to save for retirement.They have a Plan B: continue to work into retirement years or rely on social security

5

• Many self-employed take financial risks to start their business, with 1 in 4 (27%) relying on personal borrowing

• Personal borrowing also keeps one fifth (22%) of self-employed businesses running. Very few turn to small business loan/credits and even fewer turn to federal grants or loans (respectively 8%, 2%)

• Two-thirds (63%) feel they have sacrificed the benefits of traditional employment: many have to work long hours (52%), are never able to completely turn off (41%) and are under constant financial pressure (40%)

• When asked to make comparisons to how they felt a year ago, 6 in 10 (59%) say they are more anxious about earning a steady income, while half are more anxious about expanding their business (53%) and fulfilling their business’ financial commitments (47%)

Key Findings (Continued)Self-employment is a rewarding employment choice for many Americans, but can come with a personal and financial cost. In the last 3 to 5 years many have seen the costs of running their business go up, profits decrease and their ability to save for retirement impeded, leaving many self-employed Americans far behind with their savings goals

• Three quarters (76%) of self-employed Americans have had a taste of traditional employment before venturing out on their own

• Over 4 in 10 (43%) believe that they would be in a job they either don’t enjoy or would be overqualified for if they were not self-employed

• Furthermore, 7 out of 10 (72%) say being self-employed has been more financially rewarding than expected and half (50%) are willing to sacrifice short term comfort for future success

The challenges of self-employment are numerousand self-employment comes with financial risks and personal sacrifices

Yet, despite all of this, becoming self-employed is a rewarding choice for many

6

Becoming Self-employed

7

Which of the following best describes the historyof your working status up to this point?

Three in 4 (76%) self-employed spent time traditionally-employed before starting their self-employed careers

Q236. Base: All (N=1,505)

10%

47%

28%

13% Only ever self-employed

Traditionally-employed first, then self-employed(no overlap)

Traditionally-employed first, then self-employed(with overlap)

Various periods of traditional and self-employment

Traditionally-employed first: 76%

8

One-fifth (21%) of self-employed are in the professional and business services sector

Q100. Base: All (N=1,505)

In which sector is your business?

Other

Manufacturing

Transportation and warehousing

Wholesale trade

Agriculture

Leisure and hospitality

Financial services

Information technology

Education/Educational services

Construction

Health care and social assistance

Retail

Professional and business services 21

10

86

5

4

4

3

2

2

1

1

33

%

9

The vast majority (90%) of self-employed do not import or export goods or services

Q110. Base: All (N=1,505)

Does your business import or export any goodsor services from/to outside of the U.S.?

90% 6% 6%

Neither imports nor exports goods and/or services

Imports goods and/or services

Exports goods and/or services

Boomers: 3%Gen X: 5%Millennials: 9%


10

Personal borrowing is the most common source of start-up funds, for 1 in 4 (27%) self-employed. One in 5 (22%) self-employed Millennials used a gift or loan from their family

Q260a. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)

Boomer 25 10 10 2 1 0 0 60

Gen X 25 11 11 3 2 2 1 60

Millennials 29 22 13 6 3 3 3 46

When you initially started your current business, which of the following sources of funding, if any, did you use?

Personal borrowing

Financial gift/loan from

parents/family friends

Federal/state grants/

loans

Small business

loan/credit (bank)

Investmentsfor shares/ownership

Short-term online loans

Crowd-sourced funding

None

27%14% 11% 3% 2% 2% 1%

55%

11

Which, if any, of the following types of support have you relied upon to help you achieve your goals?%. Top 5 sources, plus None

A third (34%) of self-employed have had to rely on credit cards to help them reach their goals, including 4 in 10 (41%) self-employed Millennials

Q210. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)2013 Base: Q360, All self-employed (N=1,507). 2013 survey available at http://www.amtd.com/newsroom/research-and-story-ideas/research-and-story-ideas-details/2013/Self-Employed-Survey/default.aspx

Credit card

Personal/unsecured loans and/or personal line of credit

Living with your parents/other family members for free/for a small amount of rent

A financial gift from parents/other family members that you didn't/don't need to repay

Small business loan and/or business line of credit

None of the above

2013

37%

14%

13%

15%

6%

38%

34%

14%

14%

12%

11%

38%

Boomers: 30% Gen X: 32% Millennials: 41%





12

Two-thirds (63%) of self-employed feel they have sacrificed the benefits of traditional employment

Q220. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)

Which of the following sacrifices have you had to make to be self-employed/a small business owner?

63%52%

41% 40% 39% 36% 30%23%

The benefits of traditional employment

Working long

hours

Constant financial pressure

Never able to completely

turn off

Prioritize business

over personal life

Put aside personal

well-being

Spend less time with

family

Carry a lot of debt instead

of saving money

Boomer 62 51 36 34 36 33 28 19

Gen X 61 54 40 40 39 37 29 23

Millennials 67 53 48 46 44 39 31 28

13

Four in 10 (43%) self-employed, rising to half (48%) of self-employed Millennials, believe that if they were not running their own business they would be in a job they didn’t like, or would be overqualified for


If you had not created your own business, do you think you would be unemployed or in traditional employment?

9% 43% 34%

Unemployed In a job I wouldn’t enjoy or would be overqualified for

Employed in a job I would enjoy

14%

Not sure


14

2 1 3 6 16 17 17 20 7 12

5 6 7 8 9 10Much worse

than I expected

Much better than I expected

72% Better than expected (6-10)12% Worse than expected (1–4)

For 7 in 10 (72%) self-employed, being self-employed has been more financially-rewarding than expected


1-4

To what extent has being self-employed turned out the way you expected when you first became self-employed, in terms of being able to live a financially comfortable life?%

Boomers: 77% Gen X: 71%Millennials: 68%

15

Challenges Of Running A Small Business

16

Six out of 10 (59%) of self-employed are somewhat/much more anxious about earning a steady income now than a year ago


Compared to 12 months ago, to what extent are you more anxious about the following aspects of being self-employed or running a small business? Your ability to….

29

35

42

13

12

10

40

41

35

19

12

12

No more anxious than 12 months ago (1) Slightly more anxious (2 to 3)Somewhat more anxious (4-7) Much more anxious (8 to 10)

Fulfil your business' financial commitments

Expand your business

Earn a steady incomeSomewhat/much more anxious (59%)

Somewhat/much more anxious (53%)

Somewhat/much more anxious (47%)

%




17

One in 5 (22%) self-employed are using personal borrowing to run their current business, and more than 1 in 10 (13%) self-employed Millennials are using money from their family

Q260b. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)

Which of the following sources of funding, if any, are you currently using to run your current business?

22%8% 8% 3% 3% 2% 2%

65%



Federal/ state grants/

loans

Small business

loan/credit (bank)

Investments for shares/ownership



NonePersonal borrowing

Boomer 18 9 4 1 1 1 1 72

Gen X 21 8 6 3 3 1 1 69

Millennials 26 9 13 6 4 5 3 55

18

One in 5 (20%) self-employed would turn to their family if they needed additional funds for their business, rising to 1 in 3 (31%) self-employed Millennials


If you needed to access additional funding for your current business, which of the following sources would you be most likely to use?

40% 38%

20%8% 8% 7% 5%

22%



Federal/ state grants/

loans

Small business

loan/credit (bank)

Investments for shares/ownership



NonePersonal borrowing

Boomer 41 41 9 3 3 3 3 27

Gen X 41 39 20 8 9 8 6 22

Millennials 37 34 31 14 11 9 7 19

19

On average, self-employed hold over $7,000 in student loan debt, rising to over $15,000 for self-employed Millennials


79

3 3 4 2 2 3 2

95

0 1 2 1 1 1 0

82

4 2 4 2 3 2 2

59

5 7 7 5 3 6 4

0

20

40

60

80

100

Zero Under $5,000 $5,000 to$9,999

$10,000 to$19,999

$20,000 to$29,999

$30,000 to$49,999

$50,000 to$99,999

$100,000 ormore

Self-employed Boomers Gen X Millennials

All self-employed Boomers Gen X Millennials

Average debt (Mean) $7,870 $1,215 $6,835 $15,525

All with student loan debt: 20%Boomers: 5%Gen X: 18%Millennials: 36%

How much student loan debt do you currently have?%

20

Which of the following statements best describes how you view the balance between living a comfortable life now and committing resources to your business?

Half (50%) of self-employed are willing to sacrifice short-term comfort for future success, rising to 6 in 10 (58%) Millennials


50%

38%

12%I am willing to make sacrifices for my business now in order to have a more comfortable life in the future

I want to be able live comfortably now, even if it means that I may not be developing or growing my business as fast as

I don't know



21

For self-employed, being financially secure is the most important evidence of a comfortable life


Which of the following do you consider to be important aspects of living a comfortable life?

Not having to worry about money or debt

Having savings put aside for an emergency/a rainy day

Having time to relax away from work

84%

82%

74%

66%

65%

65%

Having enough discretionary income to afford things I want but don’t necessarily need

Being able to take regular vacations

Owning a home

22

Impact of Technology

23

Which of the following roles, if any, does technology play in your business? It allows me to…

Technology is essential for self-employed to communicate and manage their business, and particularly so for self-employed Millennials

Build tools/ products/ solutions that are part

of my business offering

Manage my business

Communicate Collect/find information

None of the above

Boomers 77 69 67 32 7

Gen X 75 75 68 40 8

Millennials 80 79 68 48 5


77% 74% 68% 40% 7%

%

24

Over the past 4 years, has your business become more or less reliant on technology?

More than half (54%) of self-employed are more reliant on technology now than 4 years ago


LessMore Same Not applicable

54%

32%

4%10%

2%Slightly Less

3%Much Less

Boomers: 38%Gen X: 36%

Millennials: 22%

25%Slightly Less

29%Much Less

Boomers: 4%Gen X: 8%

Millennials: 18%

25

6 14 7 7 5 12 14 14 11 4 6

5 6 7 8 9 10

Notincreased

at all

Increaseda great deal

67% Increase (4-10)27% No increase/minor increase (1–3)

Two-thirds (67%) of self-employed have seen the cost of keeping up-to-date with technology increase in the past 4 years

Q150. Base: All (N=1,505)

Compared to 4 years ago, to what extent has the cost of keeping up-to-date with the technology your business requires increased?

4321

I Don’t Know

%

26

One in 5 (22%) of self-employed feel their businesses could not have existed 20 years ago as its existence has been made possible by technological advancements, rising to 1 in 4 (28%) of Millennials


Do you think that your business could have existed in its present form 20 years ago, or has its existence only been made possible by more recent technological advancements?

70% 22% 8%

Could have existed 20 years ago

Could not have existed 20 years ago

Not sure


27

Do you consider yourself to be running a 'start-up'?

One in 5 self employed (20%) are running a start up, rising to a third (32%) of self-employed Millennials


1/5(20%) of

self-employed consider

themselves to be running a start-up

BABY BOOMERGENERATION X

MILENNIALS

9%

20%

32%

28

The ChangingBusiness Climate

29

Do you feel that the business climate you operate in is changing more or less rapidly than it was 3 to 5 years ago?

The business climate is moving faster now than 3-5 years ago, for most self-employed (57%)

Q320. Base: All (N=1,505)

LessMore Same

57%

32%

11%

8%Slightly Less

3%Much Less

31%Slightly More

25%Much More

30

4 2 9 14 30 18 12 6 2 3

5 6 7 8 9 10Decreased

a great deal

Increased a great deal

42% Increased (6-10)28% Decreased (1–4)

Three in 10 (28%) self-employed has seen their profits decrease over the past 3 to 5 years


1

Compared to 3 to 5 years ago, to what extent has the dollar value of profit that you make from your business increased or decreased?

2 3 4

%



31

Over the past 3 to 5 years, 1 in 3 (32%) self-employed say the cost of doing business has increased, and one in four (27%) believe that the effect of government regulations has become worse


Compared to 3 to 5 years ago, to what extent is each of the following aspects of the business climate you operate in better or worse?

14

15

17

22

22

27

32

14

14

20

24

8

19

25

19

24

35

41

15

23

34

53

46

28

13

55

31

9

Worse (1 to 4) Neutral (5) Better (6 to 10) Not applicable

The effects of government regulations on your business

The cost of doing business

The healthcare costs of your employees

How demanding your customers are

Ability to hire staff/expand workforce

The minimum wage

How easily you can access capital for your business, if required

%

32

Six in 10 (61%) self-employed are somewhat/much more anxious about saving money for retirement now than a year ago


Compared to 12 months ago, to what extent are you more anxious about the following aspects of being self-employed or running a small business? Your ability to….

26 13 38 23

No more anxious than 12 months ago (1) Slightly more anxious (2 to 3)Somewhat more anxious (4-7) Much more anxious (8 to 10)

Save money for retirement

61% Somewhat/much more anxious (4-10)

%


33

A raise in the minimum wage to $15 would not impact the majority (70%) of self-employed

Q340. Base: All (N=1,505)

In what ways do you think an increase in the minimum wage to $15 could affect your business?

54%

It could reduce my willingness to take on risk/make investments/develop new products or services

17%

17%

It could reduce my personal profit/income/ability to save

It could reduce my ability to expand my work force

It will have no impact – I don't employ anyone and do not intend to employ anyone

It could limit the growth of my business

It will have no impact – I pay more than $15 per hour to people who work for my company

It could drive me to seek a full or partial workforce that is outside of the United States

17%

10%

4%

16%No impact: 70%

34

26 4 6 4 11 7 8 7 3 23

5 6 7 8 9 10Not at all Completely

49% Support (6-10)40% Do not support (1–4)

Slightly more (49%) self-employed support a rise in the minimum wage to $15 compared to 4 out of 10 who do not support it (40%)


1

As a small business owner, to what extent do you support a $15 per hour minimum wage?

2 3 4

%


35

You may be aware that there was a change in 2012 in the way the federal government defines a small business, which means that larger small businesses (those with under 500 employees) can now apply for government grants and funding that was previously only available to small businesses with fewer than 20 employees. Which of the following best describes how you feel about this change?

Equal numbers of self-employed (1 in 5) feel the recent change in the federal small business definition to include larger small businesses is fair (18%) as feel it is unfair (19%)


19%

18%

48%

14%I think this is an unfair change that makes it harder for the smallest small businesses to succeed

I think this change is fair because all small businesses may need access to government support

I don't care about this change because my business does not/will not apply for government grants or funding

None of the above


36

A quarter (26%) of self-employed say that rising healthcare costs have reduced their ability to save, though two-thirds (65%) say that their business has not been affected


Over the past few years, the cost of health insurance has risen for some businesses. How has the rising cost of health insurance impacted your business, if at all?

It has reduced my personal profit/income/ability to save

It has limited the growth of my business

It has reduced my ability to expand my work force

26%

10%

10%

8%

6%

65%

It has reduced my willingness to take on risk/make investments/develop new products or services

It has meant some staff have had their working hours reduced in order to avoid qualification for health insurance

There has been no impact on my business

37

Even though most self-employed have not been affected by rising healthcare costs, reducing healthcare costs is the most desired Presidential priority, for half (51%) of self-employed


Other than cutting taxes, which of the following would be the best way the next President could help self-employed and small business owners?

Reduce the cost of healthcare to self-employed and small businesses

Increase the number of grants/loans available to self-employed and small businesses

Improve the education of the workforce

51%

16%

12%

10%

6%

4%

Prevent increases to the minimum wage

Make it easier to restructure/reduce the workforce of self-employed and small businesses

Reduce access to small business loans by companies that have more than 100 employees

38

Few self-employed (19%) expect the next President to have helping small business owners within his or her top 3 priorities


4%15%

17%

44%

20%

Number 1 Priority

In the Top 3 Priorities

In the Top 5 Priorities

Not Within the Top 5 Priorities

I Don’t Know

How much of a priority do you think helping self-employed/small business ownerswill be for the next President?

Top, or in Top 3 priorities: 19%)

39

Financial Advice

40

One in 4 (28%) self-employed has received professional financial advice in the past 12 months, falling to 1 in 5 (20%) self-employed Millennials. One in 10 (9%) self-employed has used a robo-advisor

Q400. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503). Multiple responses allowed

38%I have had discussions with a spouse or partner or parents/guardians

34%

24%

I have searched for information online

I have had discussions with a professional financial planner or financial advisor

I have read financial/investment books, magazines, watched/heard television/radio programs

I have had discussions with a lawyer or accountant

I have had discussions with family members

28%

23%

17%

9%

+29% None of the above

I have used an online, automated tool to create and/or manage an investment portfolio

In the past 12 months, have you received any financial advice or guidance, or researched anything related to your long term savings and investments, in any of the following ways?



41

In the past 12 months, have you received any financial advice or guidance, or researched anything related to your long term savings and investments, in any of the following ways?

Retirement planning (73%) and investment management (68%) are the most common topics of discussion with a professional financial planner or advisor

Estate planningInvestment portfolio

management

Retirement planning Tax planning Access to capital

73% 68% 49% 32% 17%

Q412. Base: All receiving professional financial advice in the past 12 months (n=422)

+5% None of the above

42

Self-employed who have not received professional advice prefer to rely on their own expertise (53%), or do not believe professional advice would provide a benefit (25%)

Q420. Base: All not receiving professional financial advice in the past 12 months (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503). Multiple responses allowed

Why have you not used a professional financial advisor or financial plannerin the past 12 months?

+18% Other reasons

I prefer to manage my own finances

I don't think a financial advisor or financial planner would add value beyond what I can do for myself

Financial advisors and financial planners are too expensive/not worth the cost

53%

25%

25%

15%

9%

6%

I don't trust financial advisors or financial planners to give fair/unbiased advice

I haven't been able to find a good financial advisor or planner

I prefer to use online providers or automated tools (such as 'robo-advisors')



43

Saving for Retirement

44

Over half (55%) of self-employed are currently saving for retirement, dropping to under half (43%) of self-employed Millennials, who are more likely to be saving for unforeseen emergencies (52%)


Boomers 69 41 25 23 17 16 5 6

Gen X 54 42 31 18 18 18 14 23

Millennials 43 52 39 23 25 18 31 19

Which of the following, if any, are you currently saving or investing for?

55%45%

32%22% 20% 17% 16% 16%

Home Improvements

Car, or other vehicle

Unforeseen emergency

Down-payment on property

Retirement Vacation Nothing in particular

Education for children

+11%Others+11% Not saving

%

45

Self-employed are most likely to only be saving for retirement, when they can afford it (41%). One in 4 (26%) self-employed saves a fixed amount of money for retirement on a regular basis

Q510. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)2013 survey available at http://www.amtd.com/newsroom/research-and-story-ideas/research-and-story-ideas-details/2013/Self-Employed-Survey/default.aspx

13%

13%

15%41%

18%

Which of the following best describes how you save or invest money for retirement?

Fixed amount deducted before taxes on a regular basis2013: 8%

Get income first, then put fixed amount in to savings on regular basis2013: 10%

Get income first, then put money in savings on regular basis, but amount varies2013: 14%

Save what I can afford whenever I can afford it2013: 40%

Do not currently save for retirement2013: 28%

Fixed amount regularly (26%)2013:18%

46

Half of self-employed (48%) say that unpredictable income and expenses are the largest barrier to regular saving for retirement. Having too many personal expenses is also a barrier for half of self-employed Millennials (49%)

Q525. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503). Multiple responses allowed.

Which of the following, if any, prevent you from being able to save or invest the amount of money you want to save or invest for retirement each month?

Not being able to predict my income and/or expenses

Having too many personal expenses

Needing to prioritize investment in my business above saving for retirement

48%

38%

17%

9%

8%

5%

Not having enough time to pay attention to/learn about saving/investing for my retirement

Not having an automatic or easy way to save for retirement

Not having a good relationship with someone whose financial advice I can trust





47

A lack of income is the main barrier to saving for retirement, for 57% of self-employed. This was also the top reason in 2013, though for 78%. One in four (37%) Millennials has not started to save for retirement

Q545. Base: All not currently saving for retirement (n=269). Multiple responses allowed. Responses below 5% not reported. 2013: Q540 Base: All self-employed not saving for retirement (n=423)2013 survey available at http://www.amtd.com/newsroom/research-and-story-ideas/research-and-story-ideas-details/2013/Self-Employed-Survey/default.aspx

Which of the following, if any, are reasons why you are not currently saving or investing money for retirement? All reasons of 5% or above

2013

78%

28%

7%

4%

8%

I can't currently afford to save for retirement

I am too young to need to be saving for retirement

57%

29%

7%

7%

6%

My spouse/partner will fund my retirement so I don't need to save

I will live on the profits from my business, which will keep running when I retire, so I don't need to save

I haven't started saving for retirement yet Boomers: 15% Gen X: 30% Millennials: 37%

48

Over half (55%) of self-employed feel they are behind with their retirement savings


AheadBehind On Track

55%

18%14%

8%Slightly ahead

6%Very far ahead

22%Slightly behind

33%Very far behind

Thinking about how much money you need to save or invest throughout your working life for your retirement, do you feel you are ahead, behind or on track?


+12% Don’t know

49

Not being able to save as much as desired is the main reason whyself-employed feel behind with their retirement savings (56%), followed by being unable to save regularly (44%, 50% for self-employed Millennials)

Q566. Base: All who are behind with their retirement saving (n=832, Boomers n=252, Gen X n=290, Millennials n=290). Multiple responses allowed.

Which of the following, if any, are reasons why you are notcurrently saving or investing money for retirement?

I am unable to save as much as I want to

I am unable to save regularly

I have had to use money I would normally have put aside for retirement to support my business

56%

44%

32%

29%

26%

16%

I started saving for retirement later than I should have

I do not have a regular savings plan for retirement

I haven't yet started saving for retirement





50

Three in 10 (31%) self-employed have a specific savings goal for retirement, and the average goal is $1.1mln

Q570. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)Q571. Base: All with a specific savings goal ((n=468, Boomers n=157, Gen X n=147, Millennials n=164)2013 survey available at http://www.amtd.com/newsroom/research-and-story-ideas/research-and-story-ideas-details/2013/Self-Employed-Survey/default.aspx

31%

69%

Do you have a specific savings goal for retirement?

Yes

No

Mean Savings Goal:

$1,100,000Mean Savings Goal (2013):

$1,600,000

% with savings goal

2015 2013

Boomers 31 29

Gen X 29 34

Millennials 33 33

Mean Savings Goal

2015 2013

Boomers 1,000,000 1,100,000

Gen X 1,200,000 1,800,000

Millennials 1,400,000 1,900,000

51

On average, self-employed with a savings goal have saved 31% of it, the same as seen in 2013

Q572. Base: All with a specific savings goal ((n=468, Boomers n=157, Gen X n=147, Millennials n=164)2013 survey available at http://www.amtd.com/newsroom/research-and-story-ideas/research-and-story-ideas-details/2013/Self-Employed-Survey/default.aspx

What percentage of your retirement savings goal do you already have saved?

31

55

26

13

31

56

26

12


2015 2013

%

52

On average, self-employed Boomers are $335,000 away from their retirement target, meaning a potential $1.7 trillion collective ‘retirement gap’

Q571/Q572. Base: All Self-employed Boomers with a specific savings goal (n=157)1. Calculated by multiplying individual savings targets (Q571, slide 51) by how far away from target (i.e. 100% minus current savings progress, Q572, slide 52)2. 15 million self-employed http://www.bls.gov/news.release/empsit.t09.htm. Assuming similar age distribution as general population: http://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf gives approximately 35% in Boomer age-range, rounded down to 5 million for conservative estimate

Potential “Retirement Gap” Calculation

Then 5 million self-employed Boomers x $335,000

And if the average savings shortfall is $335,000 across all self-employed Boomers (i.e. not just those with a savings target)

Self-employed Boomers who have retirement savings targets are, on average, $335,000 short of the target1

And if there are 5 million self-employed Boomers2

$1.7 Trillion‘Retirement Gap’=

http://www.bls.gov/news.release/empsit.t09.htm

http://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf

53

On average, self-employed are putting away $400 a month innon-retirement savings or investments

Q530. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)1. Average savings calculation excludes lowest and highest 5% (i.e. excludes outliers)

How much money do you save or invest for anything other than retirement, in a typical month?

25

10

21

812 12

63

29

7

16

7

14 15

9

4

28

8

23

8

13 12

4 3

1816

25

10 10 10

4 4

0

20

40

Zero Under $100 $100 to $249 $250 to $499 $500 to $999 $1,000 to$1,999

$2,000 to$4,999

$5,000 or more


All saving money for something other than retirement: 74%Boomers: 71%Gen X: 71%,Millennials: 79%

Monthly Savings All self-employed Boomers Gen X Millennials

Average (Mean) 1 $415 $525 $345 $385

Median $200 $200 $200 $150

%

54

Three-quarters (75%) of self-employed say that the recent stock market volatility has not changed the way they save or invest for retirement

Q540. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503). Multiple responses allowed, excluding the bottom option (“...has not changed the way I save or invest...”)

Has the economic and stock market volatility seen in recent months changed how you save or invest for retirement in any of the following ways?

The recent stock market volatility has not changed the way I save or invest for my retirement

I have decreased the amount of money I invest in the stock market

I have sold some investments and am holding the funds in cash

75%

10%

7%

6%

5%

3%

I have increased the amount of money I invest in the stock market

I have sold some higher-risk investments and purchased lower-risk investments in their place

I have sold some lower-risk investments and purchased higher-risk investments in their place

55

As seen in 2013, most (57%) of self-employed expect that the savings they make during their working life will fund their retirement, even when, as we have seen, most are behind with their retirement savings

Q580. Base: All (N=1,505, Boomers n=500, Gen X n=502, Millennials n=503)2013 survey available at http://www.amtd.com/newsroom/research-and-story-ideas/research-and-story-ideas-details/2013/Self-Employed-Survey/default.aspx

Where do you expect the money that you will need during retirement will come from?

Working and saving money myself before I retire

Social security / pensions from the government

Investments in my IRA

57%

51%

28%

23%

23%

22%

The retirement funds of my spouse/partner

Real estate investments

Investments in my 401(k), 403(b) or other retirement plan

2013

37%

The profits from my business, which will keep running when I retire25%

Investments (excluding real estate, IRA, 401(k))

59%

49%

38%

25%

19%

23%

22%

19%


%, 20% or above






56

Continuing to work is plan B for most self-employed (76%) if they do not hit their retirement savings target, followed by cutting back their outgoings (48%)

Rely on my spouse's savings/retirement

funds

Reduce outgoings and expenditures

Continue working Sell or downsize my home

Rely on support from children/

family-members

Boomers 72 47 31 14 2

Gen X 78 49 34 18 4

Millennials 78 49 32 23 10


76% 48% 32% 18% 5%

If, by the time you reach your intended retirement age, you do not have enough money to fund your retirement, which of the following, if any, will you do?

%

57

Appendix

58

Survey sample characteristics (100% Self-employed)

Base: All Self-employed (N=1,505)

7

1520

25

11

22

New England Mid-Atlantic South Midwest Southwest West

Region

1613

34 34

2

High schoolor less

Technicaldegree

Undergraduate collegedegree

Graduate/Professionaldegree

Prefer not to answer

Education

23 20 16

31

11

Less than $50k $50k- <$75k $75k - <$100k $100k + Don't know/Prefernot to answer

Household Income

Marital Status

26

63

91

Single, never married Married/ Common law Separated/ Divorced Widowed

45

55

Male Female

Gender

%

59

Survey sample characteristics (Continued)

Type of Self-Employment

2936

19

93 5

Entrepreneur One-personenterprise

Consultant/Freelance Contractor Broker/agent Other

33

1

1

2

2

3

4

4

5

6

8

10

21

Other

Manufacturing

Transportation and warehousing

Wholesale trade

Agriculture

Leisure and hospitality

Financial services

Information technology

Education/Educational services

Construction

Health care and social assistance

Retail

Professional and business servicesSectors

Base: All Self-employed (N=1,505)

understanding the financial challenges unique to self-employed … · 2016-01-15 · 2. table of...

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