Part-time work offers greater flexibility than traditional, full-time employment, but it comes with its own challenges. Part-time workers typically earn less than full-time workers. This, and the fact that they often don’t qualify for employee benefits, can make it more difficult for them to save for retirement.

These barriers aren’t easy to overcome. But part-time workers who have extra cash to spare will benefit from a new law change that took effect on Jan. 1.

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Easier access to workplace retirement plans

Part-time workers will now have an easier time contributing to their employers’ 401(k) plans, thanks to a provision in the 2022 SECURE 2.0 Act that finally went into effect in 2025. This also applies to certain 403(b) plans.

Most 401(k)s have a dual eligibility requirement. Employers must allow employees who meet one of the two criteria to participate in the plan if they want to. To qualify, employees in past years must either:

• Have completed at least one year of employment with at least 1,000 hours of service during that year, or
• Have completed at least three years of employment with at least 500 hours of service in each of the three years

The law change amends the latter rule. Beginning in 2025, part-time employees only need two years of employment with at least 500 hours of service in each to qualify. This doesn’t apply to collectively bargained plans, and pre-2021 service doesn’t count.

It may not make a big difference to you if you’ve been with your employer for some time. But it could be helpful to those who haven’t been with their company long who want to save money for their retirement and possibly take advantage of any 401(k) match the company offers.

What this means for part-time workers

Part-time workers may have the opportunity to contribute to their company’s 401(k), but there are a few factors to weigh before deciding whether this is the right move for you. The first is obviously financial. If you cannot afford to defer any of your paychecks, it doesn’t make sense for you to do so. You’re better off using your paychecks to help you pay down or avoid debt today.

If you have extra cash, then the question to ask yourself is whether your employer’s 401(k) is the right place for your savings. This comes down to two things: the existence of a 401(k) match (and any applicable vesting schedule) and its investment options.

If your plan offers a 401(k) match, this is a strong incentive to contribute at least a portion of your checks to your 401(k). The match is like a bonus from your employer, but if you don’t defer any of your own paychecks for retirement, you forfeit it.

However, if you’ve only been with the company for a couple of years and don’t plan to remain there much longer, you may not be fully vested. In that case, quitting could cause you to forfeit some or all of your match. If that’s a possibility for you, you may prefer to keep your savings outside of your 401(k).

You might also prefer to use an IRA rather than a 401(k) if you don’t like the 401(k)’s investment options. IRAs offer greater flexibility, which can also help you minimize how much you pay in investment fees.

Ultimately, the goal is to save money for retirement. You can accomplish that goal with a 401(k), an IRA, or both. Review your options and decide what your best move is for 2025. If you plan to defer money from your paychecks, set up regular transfers so you don’t forget to make them.

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