Why 1 in 5 Gig Workers Is Over 55 — and What That Tells Us About Retirement Accounts

There is a story most Americans tell themselves about the gig economy.

The story goes like this: gig work is for young people who want flexibility. College students driving for DoorDash. Freelancers in their 20s building a portfolio. Side-hustlers in their 30s paying off debt. It is a phase. A stepping stone. Something you do before you get a real job with benefits.

That story is wrong.

According to MBO Partners' annual State of Independence report, workers over the age of 53 now represent the fastest-growing segment of full-time independent workers in the United States. More than one in five full-time gig economy workers is over 55. In some categories of independent work, such as consulting and professional services, the over-55 demographic is the majority.

These are not people who chose the gig economy for adventure or flexibility. Many of them had careers. Employer benefits. Decades of 401(k) contributions. And yet here they are, driving rideshares at 63, doing contract work at 68, picking up freelance assignments at 71.

The question worth asking is not why they are working. The question is: why did the retirement plan they spent 30 years building not hold?

The gig economy is large and getting larger. A 2023 Gallup survey estimated that 36% of U.S. workers participate in the gig economy in some capacity, representing approximately 57 million Americans. Among those, about 29% consider gig work their primary source of income.

But the distribution by age tells the more important story.

The Federal Reserve's 2023 Report on the Economic Well-Being of U.S. Households found that among adults 55 to 64 who do any paid work, 27% report that independent contracting, gig work, or self-employment is their primary or secondary income source. For adults 65 and older who are still working, that percentage rises to 34%.

MBO Partners, which tracks full-time independent workers separately from occasional gig participants, found in their 2023 Independence in America report that workers 53 and older account for 21% of the full-time independent workforce and that this cohort grew at a faster rate than any other age group between 2020 and 2023.

The AARP Public Policy Institute has tracked a parallel trend: the share of adults 65 and older who are employed has risen steadily since 2010, from 17.4% to over 19% in 2023. Many of those jobs are part-time or contract-based.

What is happening here is not a lifestyle choice. It is a financial necessity.

The data on retirement account ownership among this cohort is important and often misread.

The assumption, when you hear about older adults working gig jobs, is that they never saved. That they ignored the 401(k) matching. That they spent everything they earned. That is frequently not the case.

The Federal Reserve's Survey of Consumer Finances (the most comprehensive triennial survey of American household wealth) found that among families with someone between the ages of 55 and 64:

• ◆56.4% own a retirement account (IRA, 401(k), 403(b), Keogh, etc.)
• ◆Of those who ever worked for an employer offering a defined contribution plan, 68% participated in it
• ◆Among those with a retirement account in this age group, the median balance is approximately $185,000

The Employee Benefit Research Institute's 2023 Retirement Confidence Survey found that 80% of current workers have saved something for retirement at some point in their career. Among workers 55 and older who are still working, 69% report having some form of retirement savings or investment account currently.

So the picture is not one of people who never saved. Most of them saved. The problem is what they saved, what it was worth by the time they needed it, and how fast it disappeared.

Here is the core problem with the standard retirement account model.

A retirement account is a lump sum. It is a finite pool of money. You spend it, it goes down. It does not regenerate. It does not adjust automatically for inflation. It does not know how old you are or how long you will live.

The most widely used framework for drawing down a retirement account is the 4% rule: withdraw 4% of your balance annually, and statistically the money should last 30 years. Let us apply that to the median.

The median 401(k) balance for workers 55 to 64 is $185,000.

At a 4% withdrawal rate, that produces $7,400 per year. That is $616 per month.

The average Social Security benefit in 2024 was $1,907 per month. Adding the average 401(k) withdrawal: $2,523 per month total. That is $30,276 per year.

The MIT Living Wage Calculator estimates a single adult in a mid-cost American city requires a minimum of $45,000 to $55,000 per year to cover basic housing, food, healthcare, and transportation without assistance. For couples, the figure runs $65,000 to $80,000.

The gap between $30,276 and $45,000 is $14,724 per year. That gap has to come from somewhere. Often, it comes from gig work.

Even workers who saved more than the median face the same structural problem. The lump-sum model has three predictable failure modes that no amount of discipline during the accumulation phase can fully protect against.

Failure mode 1: Sequence of returns risk

When you are withdrawing from a retirement account in retirement, the order of market returns matters far more than the average return. A market downturn in the first five years of retirement — before the account has had time to recover — can permanently impair the account's longevity, even if the long-term average return is exactly what was projected.

A Vanguard analysis found that a retiree who experienced the 2000 to 2002 market downturn in the first three years of a planned 30-year retirement saw their projected account longevity cut by 8 to 12 years compared to a retiree who experienced the same total return in a different sequence.

A worker who retired in January 2000 with $500,000 and took a 4% withdrawal experienced a dramatically different outcome than a worker who retired in January 1995 with the same balance. Same account size. Same savings discipline. Different sequence of returns. Very different result.

Failure mode 2: Longevity

The average American who reaches age 65 today is expected to live to 84.2 years (men) or 86.8 years (women), according to the Social Security Administration's Period Life Table. One in four 65-year-olds today will live past 90.

A retirement account that was designed to last 20 years based on actuarial assumptions from 1990 has a structural problem when the actual retirement lasts 27 years. The money does not stretch. The person does.

Failure mode 3: Healthcare costs

Fidelity Investments' 2024 analysis estimated that a 65-year-old couple retiring today will need an average of $330,000 in today's dollars for healthcare costs in retirement, not including long-term care. For a single individual, the figure is approximately $157,000.

For a retiree with a $185,000 account balance, the projected healthcare cost alone exceeds the entire retirement account.

The standard retirement account model was built for a world where healthcare was cheaper, lifespans were shorter, and the sequence of returns risk was less severe. The world changed. The account structure did not.

This is a fact that financial services companies rarely emphasize, because the 401(k) replaced pensions and the industry has an interest in sustaining confidence in the replacement.

The 401(k) was created by the Revenue Act of 1978 and implemented in 1980. It was designed as a supplemental savings vehicle for highly compensated executives who had already maxed out their pension contributions. It was not designed to be the primary retirement income source for the American workforce.

Ted Benna, the consultant who created the first 401(k) plan, has repeatedly expressed regret about what happened to his invention. In a widely quoted interview, he described the 401(k) as a "monster" that had evolved beyond its original purpose into the primary retirement vehicle for most Americans, a role it was never built to serve.

The pension it replaced provided income for life — a guaranteed monthly payment regardless of how long you lived, what the stock market did, or what your healthcare costs turned out to be. The 401(k) provides a pool of money. Those are not the same thing.

EBRI data from 2023 shows that only 12% of private-sector workers still have access to a defined benefit pension plan. Among workers 55 and older who are still working, 78% rely on a 401(k), IRA, or other defined contribution account as their primary retirement vehicle.

That means 78% of older workers are relying on a lump sum that runs down, rather than a guaranteed income stream that does not.

When you combine these data points, the picture becomes clear.

Workers 55 and older are the fastest-growing segment of the gig workforce. Most of them saved. Many of them saved consistently for decades. The median balance they accumulated — around $185,000 — produces less than $8,000 per year at a safe withdrawal rate. Social Security brings that to roughly $30,000. That falls 30% to 50% short of what is needed to cover basic living expenses in most American cities without depleting the account ahead of schedule.

So they work.

A 2022 study by the Transamerica Center for Retirement Studies found that among workers 60 and older who are still working, 54% said they were working primarily for financial reasons — income, healthcare benefits, or both. Only 19% cited personal fulfillment as the primary reason.

A RAND Corporation study published in 2023 found that 39% of workers over 65 who said they were "retired" at one point had re-entered the workforce within three years of their original retirement date. The top reason cited was insufficient income to cover living expenses.

The gig economy is, for a large share of its older participants, not a choice. It is the gap-filling mechanism when the retirement account math does not close.

The fundamental shift in thinking that this data points to is the difference between income for life and a pile of money.

A traditional retirement account is a pile of money. You can see it, count it, and spend it. It feels like security. But it has a critical vulnerability: it ends. When the pile is gone, the income stops. And the pile is always getting smaller.

Income for life means a financial structure that generates a payment to you every month regardless of how the market performs, how long you live, or what your healthcare costs turn out to be. Historically, only pensions and Social Security provided this. Social Security was never intended to cover full living expenses. Pensions have almost entirely disappeared from private employment.

What has replaced them, for those who plan ahead, is a combination of:

Annuities. An annuity converts a lump sum into a guaranteed income stream, often for life. The tradeoff is liquidity. Once annuitized, the capital is committed to the income stream.

Whole life insurance and IUL cash value. A properly structured permanent life insurance policy accumulates tax-advantaged cash value that can be accessed through policy loans at any age, for any reason, with no required minimum distributions and no taxes on the loan proceeds. The cash value is not subject to market risk (in whole life) or has a zero-loss floor (in IUL). It can supplement Social Security and investment account withdrawals without triggering additional taxable income.

Dividend-producing assets. Real estate, dividend-paying stocks, and business interests that produce recurring income rather than requiring asset liquidation to fund expenses.

The consistent thread across all three is that they are structured to produce income, not just accumulate a balance. A retirement account that grows to $800,000 and then gets spent down at $40,000 per year is gone in 20 years. A policy, an annuity, or a well-structured investment portfolio generating $40,000 per year in income does not have the same depletion math.

The data on gig workers over 55 also reveals a starting-point problem that is hard to reverse late in the game.

The average American does not begin saving seriously for retirement until their late 30s or early 40s, after student loans are paid, after children arrive, after houses are purchased. That leaves 25 to 30 years of accumulation.

But income-for-life vehicles — particularly permanent life insurance structures — require time to build meaningful cash value. A policy funded at 45 with consistent premiums has approximately half the accessible cash value at 65 compared to the same policy funded at 35 with the same annual premium. The compounding window matters enormously.

This is why the workers who feel the retirement income gap most acutely are the ones who waited. Not because they did not try. Not because they were irresponsible. But because the math of compounding is unforgiving, and the 30-year accumulation window cannot be replaced by a 15-year window, regardless of how much you increase the contribution.

A 35-year-old who puts $500 per month into an IUL for 30 years has a different retirement outcome than a 50-year-old who puts $1,000 per month in for 15 years — even though the total dollar contribution is nearly identical. The difference is the compound growth of the early years. It cannot be bought back.

Nothing in this article is an argument against contributing to a 401(k). Employer matching is free money. Tax deferral is a real benefit. Consistent contributions over a career add up to meaningful capital.

The argument is simpler: a 401(k) is not a retirement plan. It is a savings account with favorable tax treatment. It does not guarantee income. It does not eliminate sequence-of-returns risk. It does not adjust for longevity. It does not cover healthcare costs. And it does not continue paying after the balance reaches zero.

The workers driving rideshares at 63 and taking contract assignments at 68 largely have 401(k)s or IRAs. They are not statistics about people who never saved. They are statistics about people who saved the way they were told to save and discovered that the plan had structural gaps they were never warned about.

The gap between a retirement savings account and a retirement income plan is where the gig economy gets its oldest workers.

All Financial Freedom works with individuals to identify the gaps in their retirement income plan and structure tax-advantaged accounts, IUL policies, and income-producing strategies that do not run out. A licensed professional will review your current 401(k), IRA, and Social Security trajectory and show you exactly what your projected monthly income looks like at 65, 70, and 80. Schedule a free strategy call and let us build the numbers for your specific situation.

• ◆MBO Partners, State of Independence in America 2023: mbopartners.com
• ◆Gallup, Gig Economy and Alternative Work Arrangements 2023: gallup.com
• ◆Federal Reserve, Report on the Economic Well-Being of U.S. Households (SHED) 2023: federalreserve.gov
• ◆Federal Reserve, Survey of Consumer Finances 2022: federalreserve.gov
• ◆Employee Benefit Research Institute, 2023 Retirement Confidence Survey: ebri.org
• ◆Social Security Administration, Period Life Table 2021: ssa.gov
• ◆Fidelity Investments, 2024 Retiree Health Care Cost Estimate: fidelity.com
• ◆Transamerica Center for Retirement Studies, Retirement Security Amid COVID-19: The Outlook of Three Generations 2022: transamericainstitute.org
• ◆RAND Corporation, Working in Retirement: Myths and Motivations 2023: rand.org
• ◆AARP Public Policy Institute, Older Workers in the Labor Force 2023: aarp.org
• ◆Vanguard, How America Saves 2024: institutional.vanguard.com
• ◆MIT Living Wage Calculator: livingwage.mit.edu
• ◆Internal Revenue Service, IRC Section 401(k) Plans — History and Overview: irs.gov