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Working part-time offers flexibility and work-life balance, but it can significantly impact your retirement savings potential. Understanding the challenges and available strategies can help you build a secure financial future despite working fewer hours.
It’s not just about the paycheck. Retirement savings often depend on access to employer-sponsored plans like 401(k)s and the extra boost you get from employer matching contributions. Unfortunately, part-time workers often miss out on one or both of these perks. Unfortunately, part-time workers often miss out on one or both of these perks. Here’s why.
Limited Access to Workplace Retirement Plans
Traditionally, 401(k) plans were reserved for full-time employees. That’s because employers usually set eligibility rules based on hours worked, often around 1,000 hours per year. If you’re working 20 hours a week or juggling multiple part-time jobs, that threshold can be tough to hit.
Without access to a 401(k), you lose the chance to contribute pre-tax dollars that can grow tax-deferred for decades. Over time, that missed opportunity can add up. Even a modest contribution made early in your career can grow significantly thanks to the power of compounding.
The good news is that starting in 2025, the SECURE Act 2.0 requires employers to allow long-term part-time employees who have worked at least 500 hours per year for two consecutive years to participate in their 401(k) plans. Eligibility to participate does not automatically include employer matching contributions.
Missing the Employer Match
One of the biggest advantages of a 401(k) is the employer match, which can help your savings grow a bit faster. Many part-time workers, however, either do not qualify for the match or their employer does not offer one to part-time staff.
Some employers match a percentage of your contributions up to a certain part of your salary, like 50% of what you contribute up to 6% of your pay. Others might offer a dollar-for-dollar match or a tiered structure that rewards higher contributions.
Even a small difference in contributions can snowball over time. For example, contributing $3,000 annually without a match grows more slowly than $3,000 plus an employer match. Over 20 years, that gap can easily reach tens of thousands of dollars. While employer contributions give your savings a boost, compounding over time is what truly helps your money grow.
Compounding: Time Is Your Secret Weapon
The earlier and more consistently you save, the more your money benefits from compound interest, a snowball effect where your earnings keep building on themselves over time. Missing out on contributions early in your career can make a noticeable dent in your long-term savings.
Even if you start contributing later, catching up can be difficult. Part-time work often coincides with life stages when people are balancing caregiving, school, or other responsibilities. While these years are valuable in other ways, they can also slow down retirement growth if contributions are paused or limited.
