Where are the Retirement Savings of Self-Employed? An Analysis of Unconventionall Retirement Accounts

TLDR

Survey data reveal that many self‑employed individuals save for retirement in unconventional accounts such as real estate, and that in countries without mandatory retirement savings they argue against compulsory schemes. The study investigates how the perceived importance of various saving motives, including retirement, relates to actual saving behavior among the self‑employed. The authors analyze survey responses linking perceived motive importance to reported savings among self‑employed and employees. Self‑employed individuals have low retirement savings that fall short of their stated intentions, and the importance of a retirement motive does not translate into additional savings for either group, while the median annuity stream from conventional and unconventional accounts at age 67 is small, with most savings remaining residual and not earmarked for a specific motive.

Abstract

Survey data show that many respondents save for retirement in unconventional retirement accounts, such as investments in real estate. In countries where retirement savings are not mandatory for self-employed, representatives of this group often report this as an argument against making retirement savings compulsory. Our study shows that self-employed retirement savings are low and below individually pre-stated saving intentions, even though this group has generally no occupational pension. We also study the relation between the importance of a broad spectrum of saving motives, such as saving for retirement, and saving behavior. We show that finding the retirement motive important does not directly translate in additional retirement savings, both for self-employed and employees. The (median) annuity stream generated by conventional and unconventional accounts from age 67 is small; most savings are residual and are not being put aside for a specific motive.