Ride-hailing platform Uber is test-driving retirement accounts in four cities, the latest in a series of government and private efforts to get workers left out of 401(k)s to save.
Nearly 400,000 Uber drivers could get access to the new app from robo-adviser Betterment if the trial is successful in Chicago, Boston, Seattle and New Jersey, said Rachel Holt, Uber's regional general manager for North America.
Under the companies' partnership, Uber drivers can start a traditional or Roth IRA using the Betterment app, which is pre-populated with information the ride-hailing company already has on its drivers, making signup faster than for a typical customer, officials said.
Betterment expects to further streamline the app so that drivers can customize contributions on the fly if they're having a busy day, for example, said founder Jon Stein.
During the first year, users get the service free of management fees. After that, Betterment's standard fees range from 0.15 percent to 0.35 percent of customer accounts, depending on account size. That's in addition to the underlying fees of the investments.
Lack of adequate retirement savings "is a problem not only for independent workers, but Americans in general," said Holt. "When people have access, they are more likely to save."
But the accounts aren't 401(k) plans protected by federal labor laws or matched with employer funds, and there are a variety of other caveats:
_These may be the wrong accounts for you. If you're a self-employed independent contractor, you can save much more by opening a Simplified Employee Pension IRA (SEP-IRA), a Savings Incentive Match Plan for Employees (SIMPLE IRA) or a Solo 401(k). Contribution limits vary among the types of plans _ up to $53,000 in some cases _ but the plans can be managed cheaply and paperwork can be handled without an attorney in most cases. Betterment currently doesn't offer these IRAs for the self-employed, so 2016 contributions are generally limited to $6,500 for those over 50.
_Too much of a good thing. Though gig-economy workers typically aren't so flush with cash that they would get near those limits, they do need to pay attention to the rules. While you can generally contribute to an IRA if you also are participating in an employer 401(k) plan, your tax deduction on the IRA contribution could be eliminated depending on your earnings. And the IRA contribution limits apply to each person, not each account, so you can't have multiple IRAs and contribute the maximum to each.
_You can do this on your own. Opening an IRA online is free and fast for retail customers at a huge number of financial institutions, so if any employer offers the option of starting one through the workplace, make sure you compare fees, investment options and services. Betterment, for example, constructs portfolios based on savers' risk tolerance and other factors. Others may offer target-date mutual funds designed to be a one-decision investment pegged to your age, or of course you can choose and manage your own investment picks.
Despite the caveats, any steps toward making retirement saving easier, particularly for those without 401(k) access, is a good thing, said Catherine Collinson, president of the Transamerica Center for Retirement Studies.
In its recently released annual retirement survey, the foundation queried 4,161 full and part-time workers, finding 61 percent had still not recovered from the last economic recession.
"A lot of people have seen markets recover, but as each year passes they are all a little older and realizing how close retirement is on the horizon," she said. "Confidence has stalled."
