In addition to the general difficulty of putting money aside for retirement, part-time employees confront additional challenges that might make retirement savings seem like a distant dream. Even diligent savers may have trouble putting away as much as they would want each year if their yearly income is lower and their employer does not offer retirement plans.
Yet knowing your options and developing a solid plan may make a significant difference. In 2023 and beyond, here are three strategies for part-time employees to increase their retirement savings.
#1 Find out if you are qualified to participate in your company’s Retirement plan.
As many part-time workers lack access to workplace retirement plans, their annual savings are restricted, and they are not eligible for any employer to match the firm may give to full-time employees. Thanks to the SECURE Act and the more current SECURE 2.0 Act that should be somewhat less difficult.
Employees who have completed either one year of service with at least 1,000 hours worked or three consecutive years of service with at least 500 hours are eligible to enroll in their employer’s 401(k) plan as of the 2019 SECURE Act.
However, effective in 2025, the revised SECURE 2.0 Act reduces the second requirement from three to two years of service. If a part-time worker is unsure if they are qualified to participate in their company’s retirement plan, they should ask their employer. If your company offers a matching contribution, this is an excellent place to put your savings each year. You may greatly increase your annual savings by placing money in this account, especially if the plan offers a percentage match.
#2 Benefit from your 401(k) and health savings account
Most people who do not have access to a job retirement plan will turn to an individual retirement account (IRA). In 2023, the maximum contribution to a traditional IRA will be only $6,500, and the maximum contribution to a 401(k) will be $22,500. For many people, this will be more than enough.
You may choose where and when to make investment and tax payments from the money in your IRA. In addition to traditional health insurance, health savings accounts (HSAs) are worth considering for those who meet certain requirements. That’s a policy where the deductible is at least $3,000 for a family or $1,500 for an individual. Like typical IRA contributions, these lower your taxable income for the year. Withdrawals made for medical purposes are not subject to taxes, regardless of age. Those concerned about putting their money in a retirement account for a long time may appreciate this benefit.
You may start an HSA with any service provider so long as you have a qualified health insurance plan, and you can save up to $3,850 for yourself or $7,750 for your family. Choose a service that will let you put your HSA money to work for you. Without this, your savings won’t increase nearly as rapidly.
#3 Spousal IRA
A spousal IRA is merely a traditional IRA to which one’s spouse makes contributions on their behalf. As long as they have earned enough to fund both their individual IRA contributions and their spousal IRA contributions, they are free to save up to the yearly maximum.
If the part-time worker doesn’t earn enough on their own to save for retirement, this is a terrific option for the family’s financial security. But, once funds have been deposited into a spousal IRA, they are considered to legally belong to the spouse named on the account, regardless of whether or not the couple later divorces.
If you can save a little more each month, the abovementioned tactics will help you greatly enhance your retirement preparedness. Things are more complicated for people relying on their whole monthly income. If this is the case, you may need to think about working more hours or putting off retirement until you have enough money saved. Nonetheless, keep the advice above in mind so that you may make an informed decision about where to deposit your money when the time comes.
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