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How to Survive a Job Without Benefits: DIY Health Insurance, Retirement & Vacation

Around the time of the 2008 financial crisis, a new buzzword hit the scene: gig economy. It referred to the growing number of people who were no longer working full-time jobs, with benefits, for a single employer. Instead, they were piecing together a living from an assortment of short-term, part-time, temporary, contract, and freelance jobs.

Today, the gig economy is bigger than ever. It includes truck drivers and musicians, office temps and small business owners, freelance writers and Uber drivers. These jobs involve very different responsibilities, but they all have one thing in common: They typically don’t provide the benefits that come with traditional jobs, such as health insurance, retirement plans, vacation time, or even sick leave. A 2018 NPR/Marist poll found that 31% of all Americans who work full-time now say they’re working without benefits.

If you’re in this position, you have to find some way to provide these perks on your own. Buying your own health insurance and funding your own retirement plan isn’t as easy as simply selecting a company plan and having the payments come straight out of your paycheck, but it is possible. And with a little creativity, you can even plan ahead for vacations and sick days so that the loss of income doesn’t break your budget.

1. Do-It-Yourself Health Insurance

Heart Stethoscope Health Insurance Heartbeat

One of the biggest problems for workers in the gig economy is health insurance. The U.S. health care system is essentially built around employer-sponsored benefits, which makes it tough to get coverage if your job doesn’t provide it. The Affordable Care Act, popularly known as Obamacare, required more employers to provide health insurance for their workers, but only for permanent, full-time employees. Part-time, contract, and temporary workers are still on their own.

Fortunately, there are several health insurance options for the self-employed and other workers in the same boat to choose from. These choices are often more expensive than employer-sponsored plans, but they’re a better option than going without insurance and running the risk of having your savings wiped out by a health crisis.

Benefits From Your Spouse, Partner, or Family Members

If you’re married and your spouse works full-time, see if you can get covered as a dependent on their health plan. If you can, it will probably give you better coverage at a lower price than you could get buying insurance on your own. Employers often pick up part of the tab for their employee’s premiums, and sometimes for family members as well. And even if the company doesn’t do this, a group plan through a large employer is likely to have lower rates than an individual plan.

If you’re not married, but you live with your partner, there’s a chance you could get covered under their plan as a qualified domestic partner. However, since federal law doesn’t recognize domestic partnerships, this option is only available in some states. Typically, to get coverage as a domestic partner, you must state that you and your partner are a couple, that you share your home and living expenses, and that neither of you is married to anyone else. In some cases, you may need to produce documents such as a lease agreement or bank statements to back up your claims.

Finally, if you’re age 26 or younger, you can get coverage under a parent’s health plan. You don’t have to live with this parent – or even live in the same state – to be covered on their insurance. However, if you live out of state, there’s a risk you’ll end up paying more to see doctors who aren’t in your parent’s local network. So before you use this option, check the details of your parent’s plan.

The Health Care Marketplace

If you can’t get coverage on a family member’s plan, your next best bet is to shop for an individual plan on the official health insurance marketplace. In most states, you can simply visit HealthCare.gov to look for insurance, but some states have their own marketplaces. Typically, you can only purchase insurance here during the annual open enrollment period from November through mid-December. However, you can apply at other times if you’ve recently had a change in your life that affects your coverage, such as losing your job or moving to a new area.

Marketplace health plans can be expensive. According to a 2019 press release from the Centers for Medicare & Medicaid Services, the average monthly premium for one of these plans was $621 in 2018. However, if your income is below a certain level, you can qualify for subsidies that cover a large share of this cost. In 2018, the average worker who got a subsidy paid only $89 a month.

All plans available in the marketplace cover certain basic preventive care, such as vaccines and basic screening tests. However, the plans vary widely in what else they cover and how much they cost. According to HealthCare.gov, there are five levels of health care coverage available on the exchanges:

  • Catastrophic. These plans have the lowest monthly premiums, but they also have high deductibles – $7,900 for the year 2019. They’re available only to people under 30 and people who can’t afford a regular plan. Subsidies don’t apply to this type of plan, so if you qualify for a subsidy, a standard plan is likely to be cheaper.
  • Bronze. After catastrophic plans, bronze plans have the lowest premiums. However, their deductibles can come to thousands of dollars, and they don’t cover most routine care. All in all, they will probably cover only 60% of your health care costs.
  • Silver. These plans have moderate premiums and moderate coverage. They cover more routine care than bronze plans and have lower deductibles. They should pay about 70% of your costs overall.
  • Gold. These plans have high premiums and low costs for care. A gold plan should pay for about 80% of your health care costs, making it a good choice for people who need a lot of care.
  • Platinum. This is the most expensive type of plan. Platinum plans have low deductibles and cover around 90% of all your health care costs.

When you shop for insurance through HealthCare.gov or your state’s health exchange, you enter information about yourself, your dependents, and your income. First, the site lets you know whether you qualify for Medicare, Medicaid, or a health care subsidy. Then, it shows you a list of plans you can buy, with details such as their monthly premiums, annual deductibles, and the maximum you might have to pay out of pocket in a year. You can purchase a plan through the site and automatically apply your subsidy, if you have one, to cover part of the cost.

COBRA

If you’ve just left a full-time job to become part of the gig economy, you can get short-term health coverage through the Consolidated Omnibus Budget Reconciliation Act, or COBRA. This law allows you to keep your health insurance from your old job for up to 18 months. You must sign up for this benefit within 60 days of leaving your old job.

COBRA can also provide you with coverage if you used to be covered on someone else’s employer-sponsored plan but are no longer eligible. For instance, you can use COBRA to stay on your spouse’s health plan after a divorce or on a parent’s health plan after becoming too old to count as a dependent child. In these situations, you can keep your COBRA coverage for up to three years.

However, the benefits you receive from COBRA will probably cost you more than you paid for them as an employee. Most employers pay for part of their employees’ health care costs, but under COBRA, you generally must pay the entire premium yourself. So if you’ve recently lost a job, you’re probably better off looking for a plan in the health insurance marketplace. If you’ve already signed up for COBRA, you have the option of switching to a marketplace plan during the next open enrollment period.

Membership Organizations

Many organizations that charge dues, such as labor unions, offer health insurance as a benefit for their members. Just like businesses, these groups can band together to negotiate better prices for their members than they could get buying individual plans.

Organizations that provide health insurance include:

  • AARP. This organization promotes the interests of senior citizens. There’s no age requirement to join, but some of its benefits are only available to people over 50. It offers several supplemental health plans for people on Medicare, as well as dental insurance, hearing and vision care plans, and a prescription discount card.
  • Affiliated Workers Association (AWA). The AWA is a national association of self-employed people, independent contractors, small business owners, and entrepreneurs. It offers short-term medical insurance, accident insurance, dental plans, and vision plans for its members. It also has a variety of discount plans to reduce the cost of care.
  • Association for Computing Machinery. This association of computer professionals has partnered with HealthInsurance.com to provide a variety of medical plans for members. It also offers short-term health plans and dental plans.
  • Freelancers Union. This nationwide organization of freelancers has partnered with a couple of health insurers to offer individual plans in New York, New Jersey, California, and parts of Texas. For freelancers living in other parts of the country, the organization has its own private health care exchange where you can shop for an individual plan that’s eligible for Obamacare subsidies.
  • Writers Guild of America. This labor union represents writers of TV and movie scripts, news, documentaries, animation, and new media. Members who earn a specific amount through their writing in a given year can qualify for health coverage through the Writers’ Guild-Industry Health Fund.

If you’re not a member of any of these organizations, consider what other groups you belong to – or could be eligible to join – that might provide this benefit. Possibilities include unions, professional and trade organizations, alumni associations, and your local chamber of commerce. Call these organizations or check out their websites to see if any of them can provide you with an affordable health plan.

Other Health Care Coverage Options

Depending on your situation, there are a few other sources of health care coverage that could be available to you. For example:

  • If you’re at least 65 years old or disabled, you can apply for Medicare.
  • If you’re a student, your college or university might offer a student health plan.
  • If you’re a current or former member of the military, TRICARE can provide coverage for you and your family.
  • Look into part-time jobs that offer health benefits.
  • Look into faith-based health plans, often known as health care sharing ministries. One popular plan is Medi-Share. These plans are not ACA-compliant and often don’t cover certain health care costs, such as birth control. However, they often have lower premiums than other plans.
  • If you need short-term coverage to get you through, look into AgileHealthInsurance. Many of their health options cost $99 per month or less.

Bonus Tip: Open a Health Savings Account (HSA)

Some health insurance plans offer you the option to open a health savings account (HSA), a tax-free investment account you can use to save money for health care costs. If your plan doesn’t give you this option, you can open an HSA through Lively. You’ll then be able to use an HSA in conjunction with a high-deductible health insurance plan – for example, in 2019, individual plan deductibles must range from $1,350 to $6,750 to qualify, and family plan deductibles must range from $2,700 to $13,500.

The idea is simple: You buy health insurance with low monthly premiums, then put aside money in the HSA as a health emergency fund to cover the high deductible if you incur massive medical bills.

It makes for a compelling option, at least for healthy people with few current medical needs. Making them even more attractive, HSAs offer triple tax protection: contributions are tax-free, earnings grow tax-free, and withdrawals are tax-free if you use them for medical expenses.


2. Do-It-Yourself Retirement Plans

Retirement Plan Sketch Graph Calculator

Along with health insurance, many people rely on their workplaces for retirement benefits. Although traditional pension plans funded by employers are rare these days, many workers do most of their retirement saving through workplace plans such as a 401(k) or 403(b). These plans allow you to set aside money out of your pre-tax income for retirement and pay no taxes on it until you withdraw it. As a plus, many employers will match your contributions to these plans, at least up to a certain amount each year.

If you’re self-employed, you can’t contribute to a workplace plan. However, there are other ways for you to save for retirement on your own. You won’t be able to take advantage of employer matching, but you can still get the same tax advantages you’d get from a workplace plan.

IRAs

The simplest way to set aside money for retirement on your own is through an Individual Retirement Account, or IRA. These plans have tax advantages that help you build savings faster. They come in two main types: traditional IRAs and Roth IRAs. Both of these accounts can be set up through a broker like You Invest by J.P. Morgan.

A traditional IRA has the same tax advantages as a 401(k). You fund it with pre-tax dollars, and the money continues to accumulate tax-free until you reach retirement age, which is currently defined as 59½ years old. If you withdraw any money before then, you must pay taxes on it immediately, along with a 10% penalty. You’re required to start taking money out – and stop putting any in – when you reach age 70½.

A Roth IRA is like a traditional IRA flipped on its head. You fund it with after-tax dollars, but you pay no taxes on the money when you withdraw it. You can withdraw the money at any time without paying taxes or penalties, but you can also leave it in the account – and continue to make contributions – as long as you like. However, you can’t contribute to a Roth IRA at all if your income is above a certain limit, which in 2019 is $137,000 for single people and $203,000 for couples.

Both types of IRA have limits on how much you can contribute. For 2019, the limit is $6,000, plus a “catch-up” contribution of $1,000 if you’re age 50 or older. You can open either type of account at any investment firm. If you choose an online brokerage, you can set up an IRA in minutes.

Plans for the Self-Employed

IRAs are available to anyone, even people who already have a full-time job with its own workplace retirement account. However, if you’re self-employed, you have several additional options. These plans are a little harder to set up than a traditional or Roth IRA, but they can allow you to set aside more of your income tax-free.

Plans specifically for self-employed include:

  • Solo 401(k). This type of plan is for self-employed people with no other employees. It works just like a workplace 401(k) plan, with one key difference: You are both the employer and the employee. As the employee, you can contribute up to $19,000 per year or 100% of your earnings, whichever is less. As the employer, you can make an additional contribution of up to 25% of your income. The total limit on how much you can contribute to a solo 401(k) is $56,000 per year, plus an extra $6,000 if you’re age 50 or older. You can set up a Solo 401(k) in just minutes with Rocketdollar.
  • Roth Solo 401(k). This is the Roth version of the solo 401(k). You contribute after-tax dollars, then withdraw the money tax-free in retirement. However, unlike a Roth IRA, it doesn’t allow you to withdraw money early with no penalty. Both types of accounts require more tax-related paperwork than an IRA.
  • SEP IRA. A Simplified Employee Pension Individual Retirement Account, or SEP IRA, has the same contribution limits as a solo 401(k), but it’s easier to set up and maintain. Tax-wise, it works like a traditional IRA; there’s no Roth version. One downside is that if you have any other employees besides yourself, you’re required to contribute to their SEP IRAs as well. If you’re interested in a SEP IRA, you can open an account with TD Ameritrade.
  • SIMPLE IRA. For small business owners, a Savings Incentive Match Plan for Employees, or SIMPLE IRA, can be a better choice. With this plan, you don’t have to fund your employees’ plans all by yourself, though you typically have to make a matching contribution. However, the annual contribution limits for this plan are much lower – up to $19,000 in 2019, with a $3,000 catch-up contribution.
  • Defined Benefit Plans. Old-fashioned pension plans that pay you a specific income in retirement aren’t entirely dead. It’s still possible to get one by funding it yourself. Defined benefit plans can allow you to set aside more pre-tax dollars each year than any other type of plan. However, they’re complicated and costly to set up and maintain, and only a few brokerages offer them. And, if you have employees, you must contribute to pensions for them as well.

3. Do-It-Yourself Sick Leave

Sick Leave Post It Thumb Tack

If you have a full-time job, your employer probably allows you a certain number of sick days per year. If you catch a cold or sprain your ankle, you can take time off to recover and still get paid. But when you work for yourself, that’s not an option. You have to make the stressful choice between trying to work while you’re sick, which isn’t always possible, or losing income.

However, you can make this choice easier on yourself by planning ahead. Here are a few strategies that can help:

  • Take Care of Your Health. You’ll lose fewer days to illness if you keep yourself healthy. Eat right, exercise, and avoid tobacco. Wash your hands frequently, especially during cold and flu season. And make sure you’re up to date with all vaccinations, including a yearly flu shot.
  • Plan for Sick Days. No matter how careful you are, you can’t eliminate all risk of getting sick. What you can do is assume you’re going to need a certain number of sick days – say, eight per year – and factor them in when you plan your work schedule. For example, let’s say at your current hourly wage, you need to put in an average of 30 billable hours of work each week to make ends meet. If you boost that to 31 hours per week when you’re healthy, those extra hours will add up to about eight days’ worth of work over the course of the year – enough to make up for eight days off when you’re sick.
  • Create a Sick Leave Fund. Take the money you make from that extra hour of work each week and set it aside in a separate bank account. You can use a high-yield account from CIT Bank so it will earn interest. This will be your sick leave fund. When you have to take time off from work, you can take money out of this account to keep the bills paid until you’re back on your feet. Alternatively, you can add to and withdraw from your emergency fund for this purpose.
  • Keep Your Schedule Flexible. Even if you have plenty of money in the bank, it’s hard to take a sick day if you’ve got a big deadline looming. To avoid ending up in this situation, try to plan a little leeway into your work assignments. If you think a job will take you five days to complete, promise to have it done in seven. That way, you won’t miss your deadline if you have to take a day or two off.
  • Stay on Schedule. Of course, having extra time in your schedule won’t help if you use it as an excuse to put off getting started on a project. If you’re not sick, stick to your work schedule and avoid procrastination. If you expect an assignment to take you five days, work on it steadily for five days. Getting it done early isn’t a problem; turning it in late is.

4. Do-It-Yourself Vacation Leave

Vacation Time Calender Group Meeting Team Planning

If being self-employed makes it hard to take a day off when you have a cold, it makes it even harder to take a whole week off for a vacation. However, working all year without a break isn’t the best solution for your health or happiness. Regular vacations reduce your stress level, prevent job burnout, and can even protect you from illness. A 2000 study in Psychosomatic Medicine showed that yearly vacations reduced the rate of death from all causes for men at risk of heart disease, for example.

You can free up the time and money you need for a vacation by following the same strategies listed above for sick days on a bigger scale. For instance, you can block out time in your schedule for vacations and plan your work assignments so they don’t overlap with your time off. To make up for the lost wages, put in some extra hours at other times throughout the year.

Finally, along with your sick leave fund, create a special vacation fund. Use the money in this account to cover all your vacation expenses: the cost of the trip itself and the cost of your lost wages. You can stretch this money further by looking for ways to save money on your vacation so you won’t need to work as many extra hours to pay for it.

Bonus Tip: Consider Both Long & Short Trips

If your job allows you to telecommute and set your own hours, there are a couple of additional ways you can squeeze in some vacation time without significantly reducing your income.

If you plan it right, you can enjoy a long weekend away without actually missing any work hours. In the week leading up to the long weekend, you can get five days’ worth of work done in four days by working longer hours. You can also put in extra time the following week to make up work if needed. And three or four days is a short enough period that you don’t have to worry about missing anything too important.

Alternatively, you can go to the other extreme and take long working vacations. You may not be able to take a month away from work, but if you can take your work with you, you can work during the day and play tourist in the evenings and on weekends. Instead of living out of a hotel room and eating every meal out, book an apartment on Airbnb and cook most of your meals in. Or take it a step further and check out these ways to travel the world for free to learn how you can save on accommodations, transportation, or both.


Final Word

Right now, the majority of American workers are still able to get benefits from their jobs. However, many economists expect this to change in the future as the gig economy continues to grow. Already, The New York Times reports, many companies are outsourcing large portions of their business to subcontractors – individuals or small companies that don’t offer the same benefits as big ones. If this trend continues long enough, figuring out how to fund your own benefits won’t just be an important skill to succeed as a freelancer; it will be vital for all workers.

Do you consider yourself part of the gig economy? If so, what do you do for benefits?

Amy Livingston
Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

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