Workers who participate in the gig economy or have a part-time job have historically struggled to find ways to save for retirement. The SECURE 2.0 Act, which became law in December 2022, includes retirement savings opportunities for part-time employees, freelancers and gig workers. The new rules create more ways for workers who do not receive full-time benefits or a pension plan to save for retirement.
Some SECURE 2.0 Act changes for part-time workers include:
- Easier eligibility requirements to join a 401(k) plan.
- A saver’s match.
- Portable retirement accounts.
- Automatic enrollment in retirement plans.
- Ways to prioritize saving.
Easier for Part-Time Workers to Join a 401(k)
Prior to the SECURE 2.0 Act, employers had to allow workers to participate in their 401(k) plan if the employees had completed at least one year of service with 1,000 hours or three consecutive years of service with at least 500 hours every year.
Under the new rule, employers will need to adjust their criteria for the plans. “Long-term, part-time workers will see some assistance even sooner,” says Bryan Kuderna, a financial planner based in Shrewsbury, New Jersey, and author of “What Should I Do with My Money?” Provisions of the SECURE 2.0 law reduce the three-year rule to two years for plan years beginning after Dec. 31, 2024.
Saver’s Match Will Be Available
The saver’s credit is available to lower- and middle-income Americans who contribute to a retirement account. It applies to individuals with an adjusted gross income of $36,500 or less in 2023, or $73,000 or less for married couples filing jointly. Individuals can receive a tax credit of up to $1,000, or $2,000 for married couples.
The SECURE 2.0 Act will replace the saver’s credit with the saver’s match. Rather than receiving a credit against their tax liability, those who are eligible can expect a contribution to their retirement account. The federal government is offering a matching contribution to 401(k) and IRA participants.
The saver’s match will become effective in 2027. Individuals can expect a 50% matching contribution for the first $2,000 they save in a retirement account. Those who file as individuals could receive up to a $1,000 contribution from the federal government, and married couples can qualify for up to $2,000. “This can be a great incentive for eligible freelancers and contractors who feel they miss out on company matches, but can now get something similar from the government,” Kuderna says.
Portable Retirement Accounts
The SECURE 2.0 rules present guidelines for workers to move their retirement accounts with them when they leave an employer. “This is particularly important for part-time workers who are likely to change companies,” says Brian Colvert, a financial planner and CEO of Bonfire Financial in Colorado Springs, Colorado.
Prior to the SECURE 2.0 Act, it was often difficult for hourly employees to have access to a retirement account. “These provisions help part-time workers start saving for retirement early and ensure that their savings grow and are protected over time,” Colvert says.
Automatic Enrollment in Retirement Plans
Prior to the SECURE 2.0 Act, employers with retirement plans could choose to set up automatic enrollment for employees. With the new rules, most major companies will be required to have automatic enrollment in place. This will be effective for new 401(k) and 403(b) plans after Dec. 31, 2024.
The amount deferred must be at least 3% of pay to start and not more than 10% of compensation. With each plan year that follows, the deferrals will increase by at least 1% of compensation. This will continue until the contribution amount reaches at least 10% or up to a maximum of 15% of salary.
401(k) and 403(b) plans that are already established will not be required to follow the new automatic enrollment rules. If an employee would like to opt out of automatic enrollment, they can do so.
Ways to Prioritize Saving
The provisions of the SECURE 2.0 Act make it easier for part-time and gig workers to set aside money for the future.
“Don’t believe the falsehood that you don’t have enough money right now to save for retirement,” says Alexander Joyce, president and CEO of ReJoyce Financial in Carmel, Indiana. “Instead of following the traditional budgeting strategy of saving whatever is left once all the bills are paid, make it a priority to pay yourself first from every paycheck you get.”
You can then adjust your spending patterns to coincide with the amount left to spend. “Set aside a percentage or fixed amount from each paycheck and have it deposited into your retirement account,” Joyce says. “The amount will grow over time.”
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