DoorDash driver 401k

DoorDash is one of the big players in the gig economy, providing work opportunities for millions of American workers. Drivers can sign up on DoorDash, and start making food deliveries at their own schedules. However, this flexibility comes with certain limitations, including missing out on benefits available to full-time employees such as retirement plans.

DoorDash drivers are owner-operators, and they don’t get access to a company-sponsored 401(k) plan. However, they can still save for retirement using various retirement plan options available to self-employed people. One of these options is the 401(k) for 1099 earners which allows them to contribute up to $61,000 before tax in 2024. This retirement plan also gives them access to the money at any time without any taxes or penalties.

How does DoorDash work for drivers?

DoorDash is a food delivery app that allows customers to order food from local restaurants via a mobile app and get it delivered to their homes. Drivers who meet DoorDash requirements can start working within days, and set their work schedules depending on their requirements.

Once a driver accepts a delivery, they pick up the food from the restaurant and deliver it to the customer in minutes. For each delivery, the driver receives a base pay based on the distance covered, time, and demand, and they can also receive tips from customers to boost their earnings.

Since Dashers are independent contractors, they are responsible for their own taxes and retirement savings. They receive a 1099-NEC form, which they use to report their income and pay self-employment taxes.

Do DoorDash drivers get a 401(k)?

DoorDash drivers are owner-operators, and they do not get access to a traditional 401(k) plan that is available to full-time employees. This arrangement is common in the gig economy, including with Uber drivers and freelancers, where independent contractors don’t get traditional employee benefits.

Some of the benefits associated with traditional employment include 401(k) plans, health insurance, paid vacation, bonuses, and gym membership.

While DoorDash does not offer a 401(k) plan to its drivers, it has supported the recently introduced Retirement Savings for Americans Act, which proposes the creation of a national savings plan for all Americans, including those who don't get access to traditional defined contribution plans.

Retirement saving alternatives for DoorDash drivers

DoorDash drivers may have several retirement saving options, which are available to self-employed individuals. They include:

401(k) for 1099 earners

Beagle offers a 401(k) for 1099 earners plan for people with self-employment income. This retirement plan gives DoorDash drivers the flexibility to contribute both as an employer and employee, similar to a traditional 401(k) plan. For 2024, Dashers can contribute up to $61,000 in pre-tax contributions to maximize their retirement savings.

While early 401(k) withdrawals attract taxes and penalties, Beagle’s 401(k) for 1099 earners allows you to access your money at any time without taxes or penalties. This benefit allows you to use the retirement plan as your emergency fund, and get access to your money at any time.

Traditional IRA

DoorDash drivers can open a traditional IRA through a bank, brokerage, or other financial institution. For 2024 and 2025, Dashers can contribute up to $7,000 for individuals below age 50, and $8,000 for those age 50 and older. A traditional IRA is funded with pre-tax contributions, and drivers can claim a tax deduction when filing their annual tax return.

An IRA offers a wider pool of investment options than a 401(k), providing drivers with the opportunity to allocate their investments in diverse investments and grow their money tax-deferred. However, withdrawals from a traditional IRA are subject to income taxes and a potential 10% early withdrawal penalty if you are younger than 59 ½. 

A traditional IRA might be a good option if you anticipate to be in a lower tax bracket in retirement.

Roth IRA

Dashers can open a Roth IRA to benefit from the tax-free growth of their retirement savings. This retirement account is funded with after-tax dollars, meaning that you pay taxes on contributions and the money will continue growing tax-free. For 2024 and 2025, you can contribute up to $7,000, or $8,000 if you are 50 and over.

A Roth IRA is a good choice for Dashers who expect to have a substantial income in retirement since qualified withdrawals in retirement are tax-free. A qualified withdrawal must meet two requirements i.e. made at least five years after the year of the first contribution and the owner must be at least age 59 ½ at the time of distribution.

Solo 401(k)

DoorDash drivers are also eligible to open a Solo 401(k) and contribute both as an employee and employer. However, be aware that a Solo 401(k) is only designed for self-employed individuals without employees other than a spouse.

As an employee, a driver can contribute up to $23,000 in 2024 (rising to $23,500 in 2025), and an additional $7,500 for those age 50 and over for a total contribution of $30,500. As an employer, you can contribute up to 25% of your compensation or net self-employment income. The total solo 401(k) contribution limit is $69,000 in 2024, and the limit rises to $70,000 in 2025. If you are 50 and over, the limit rises to $77,500 in 2025.

Beginning in 2025, people aged 60 to 63 get a higher contribution limit of $11,250 due to the SECURE 2.0 Act. This brings the total contribution limit for ages 60 to 63 to $81,250.

SEP IRA

A SEP IRA is also an attractive option for DoorDash drivers since it allows higher contributions than traditional IRAs. You can contribute up to 25% of your compensation, or a maximum of $69,000 in 2024, rising to $70,000 in 2025. Self-employed individuals are limited to 20% of their net income.

Contributions to a SEP IRA can only be made by employers. However, self-employed individuals like Dashers can make employer contributions on their own behalf. Be aware that you cannot make elective salary deferrals or catch-up contributions to SEP IRAs.