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Gig Workers Should Consider These Employee-Style Benefits

Sep 17, 2018 3 min read Karen Kroll

Key Takeaways

  • If you rely on your gig income, you should consider disability insurance.
  • Health insurance is essential. Tax credits and deductions may lower your cost.
  • Gig workers can save for retirement with a solo 401(k) or SEP.


If you're a gig or freelance worker, you may not have easy access to typical employee benefits, such as health and disability insurance or a company 401(k) plan. Yet you still need the protection these products can offer.

Trying to obtain these products on your own can prompt questions: Do I need disability insurance? How can I access health insurance? How can I save for retirement as a gig worker?


Here we will help you address these questions and manage your concerns.

Disability insurance

Disability insurance can provide a source of income if you become disabled and can't continue working, as this article explains. It's critical if you are the sole or primary breadwinner for yourself or your family, says Ben Henry-Moreland, CFP with Freelance Financial Planning in Omaha, Nebraska. Some insurers offer individual disability policies. Some trade associations offer policies as well.

A key consideration is whether a disability policy pays if you can't work in your “own occupation," or only if you can't work in any capacity — an “any occupation" policy. Ideally, your policy will pay benefits if you can't work in your own occupation.

“If you can no longer work in construction, where you earn on average $75 per hour, but can still flip burgers, the [any occupation] policy might not pay out," says Cheryl Sherrard, director of financial planning with Clearview Wealth Management in Charlotte, North Carolina.

You typically can't deduct disability insurance premiums from your income. However, if you — rather than an employer — have paid all the premiums, benefits typically aren't taxed.

Health insurance

“It's not really a question. You need health insurance," says Henry-Moreland. Some gig workers go without, however, assuming the only insurance they can afford would have a deductible that's so high they'd never be able to meet it. To be sure, if you experience a serious illness or injury and need to borrow to cover a high deductible, it may take time to pay off the debt. However, going without coverage may mean you end up declaring bankruptcy. Moreover, depending on your income and household size, you may qualify for tax credits that can reduce the premiums.

And, as a gig worker or self-employed individual, you may be able to deduct health insurance premiums from your income, lowering your tax bill. You'll have to meet a few requirements/restrictions. Among others, you can't claim the deduction during any months you were eligible to participate in an employer-sponsored plan.

If you have a high-deductible plan (for 2019, these are plans with deductibles of at least $1,350 for individual coverage, and $2,700 for family coverage) and have some extra money, you can contribute pre-tax dollars to a Health Savings Account (HSA) to help cover future medical expenses.

Jodi Helmer, a freelance writer living outside Charlotte, North Carolina, opened an HSA several years ago. “I put money in my HSA now, so when I need it down the line, it's there," she says.


Retirement savings

Two retirement savings tools available to some gig or independent workers are SEP IRAs or Solo 401(k) plans. “These plans can be easily established through a discount brokerage," Sherrard says. Since they're designed for single-employee companies, they don't have the complicated funding rules found in many employer plans, she adds.

For SEPs, the maximum contribution in 2018 is the lesser of $55,000 or 25% of a participant's compensation. A word of caution: The calculations to determine the contribution limit for a self-employed person can get complicated.

In contrast, contributions to traditional and Roth IRAs were limited in 2018 to $5,500, or $6,500 if you were at least 50 years old, as this article explains.

Another option is a solo 401(k), which allows you, as a business owner, to contribute as both employer and employee. For 2018, total contributions to a solo 401(k) for individuals under age 50 were limited to $55,000; those over age 50 could contribute another $6,000. Again, the calculations for self-employed individuals can be complicated.

Helmer had been contributing to an IRA, but wanted to save more. She opened a solo 401(k) plan and bumped up her savings rate. “I definitely feel much more in control and prepared," she says.


What you can do next

If you're stumped when it comes to figuring out how you can cover the cost of insurance or start saving for retirement, developing a budget is a good first step. This article shows you how to get started with budgeting.



Karen Kroll is an experienced freelance writer and editor, with a focus on corporate and consumer finance. Her articles have appeared in AARPBulletin.com, Bankrate.com, Business Finance, CFO, CreditCards.com, Global Finance and many other publications.


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