Those who participate in the gig economy or work a part-time job have historically struggled 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. Workers will find changes coming this year and the years ahead.
Some SECURE 2.0 Act changes for part-time workers include:
— Easier eligibility requirements to join a 401(k) plan.
— Saver’s match will be available.
— 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 plan criteria. “Long-term, part-time workers will see some assistance even sooner,” said Bryan Kuderna, a certified financial planner in New York City, in an email. Provisions of the SECURE 2.0 law reduce the three-year rule to two years beginning after Dec. 31, 2024.
[Read: Ways to Save for Retirement Without a 401(k)]
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 $38,250 or less in 2024, or $76,500 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 go into effect 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 said.
[READ: How to Qualify for the Retirement Saver’s Match]
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,” said Brian Colvert, a certified financial planner and CEO of Bonfire Financial in Colorado Springs, Colorado, in an email.
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 said.
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.
[Read: Is a 401(k) Worth It in 2024? Pros, Cons and Costs]
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. “With the advances in medicine and technology, people are living longer,” said Melissa Murphy Pavone, certified financial planner and director of investments at Oppenheimer & Co. Inc. in Westhampton Beach, New York, in an email. “We need to plan for a longer retirement period. The more we save and the earlier we save, the better.”
To grow your savings, consider setting up automatic withdrawals or saving a percentage of every paycheck. You can also monitor your accounts to watch balances as they grow. Set aside time every year to review your retirement savings and establish goals for the coming 12 months.
More from U.S. News
Why a Stable Value Fund Belongs in Your Retirement Portfolio
What Is the Average Retirement Age in the U.S.?
How to Pay Less Tax on Retirement Account Withdrawals
How to Save for Retirement If You Work Part-Time originally appeared on usnews.com
Update 03/22/24: This story was published at an earlier date and has been updated with information.
