Full-Time, Part-Time? How to Retire On Time

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By Al Chingren

Al Chingren
Al Chingren
VP Personal Finance
and Retirement Solutions

There’s no one right way to plan for retirement. The broad range of employment situations—full time, part-time, both, several part-time jobs—makes it impossible to prescribe a single solution that covers all income and retirement needs.

But that doesn’t mean you have to be left without a plan (or a timeline). For every situation, there’s a way to prepare for your future.

Retirement Planning Isn’t Always Tied to Your Job

Not so long ago, retirement planning seemed simpler. People had fewer jobs over their lifetimes and could often rely on a pension, a company retirement plan and Social Security to see them through retirement.

But times are changing. Frequent job changes (or even several simultaneous jobs) are the norm. People are living longer and spending more time in the workforce. Pensions aren’t as common and, on average, Social Security may only replace 40% of previous income.

Additionally, the rise of the gig economy   is further complicating—and fracturing—hopes of a smooth, retirement planning process. The lack of a steady income or an employer’s retirement plan may contribute to the savings gap that many people face when they want to retire.

Then there’s the issue of having a fragmented plan from job hopping. Multiple past jobs might mean multiple small-balance retirement plans, or maybe no retirement plan whatsoever. You could have IRAs with different companies, or a savings account that’s not in a retirement vehicle at all.

So how do you plan for the future, regardless of your past or current work status? Consider your options and determine which fits your income and employment situation, so you can retire on your own terms.

Retirement Options for Full-Timers

Use your employer’s retirement plan to its full potential, including company matches. If you can, maximize your contributions at least up to the plan’s limit. Retirement plans like a 401(k) or 403(b) come with tax advantages, and your steady full-time income will make it easier to contribute to your retirement consistently and stay on track toward your goals.

IRAs (discussed below) are separate from your employer’s plan and offer a flexible way to add even more to your retirement nest egg.

If your employer doesn’t offer a plan, look into the retirement options for solo workers below.

Facing a Shortfall? Use a Side Gig to Supplement Savings

In addition to your employer’s plan, you can use part-time income to supplement your current living expenses, or to beef up your retirement savings. This is especially important if you got a late start in saving. Any extra income can help you make up for lost time.

And after retiring from a full-time job, you might be able to use part-time income for living expenses rather than dipping into your retirement savings. The more you save (and by holding off on withdrawing it), the longer your money has the potential to last.

Retirement Options for Solo Workers

Whether you are a one-person business or have one or more side gigs working on your own, the IRS considers you self-employed. And being self-employed means taking charge of your own retirement. Fortunately, you can choose from a variety of options to start or supplement any retirement money you’ve already saved.

Traditional and Roth IRAs

Available from most financial institutions, IRAs provide flexible investment options and tax benefits.

  • Traditional IRA contributions are tax deductible, earnings grow tax deferred and are taxed with withdrawn in retirement.
  • Roth IRA contributions aren’t tax deductible, but earnings on your money are tax-free and so are withdrawals in retirement.

You could also roll over any previous employer plan money—from a 401(k), 403(b), etc.—into an IRA for even more control over your retirement.

SEP-IRAs

A Simplified Employee Pension IRA, or SEP-IRA, allows a self-employed person (or small business owner with employees) the chance to save with tax benefits. Contributions are tax-deductible business expenses, and you’re not required to contribute every year.

Individual 401(k)

Not just for big companies, an individual 401(k) lets you change the amount you contribute from year to year and contribute as employer and employee.

In addition, individual 401(k) plans allow Roth contributions, which means qualified withdrawals are tax-free. Note that adding employees may trigger the extra rules and provisions of corporate 401(k) accounts, so be sure of your business goals before choosing a retirement plan.

Solo Plans:
Consider How Much You Can Contribute

Traditional and Roth IRA
Up to $6000 in 2019, $7,000 if over age 50.

SEP IRA
Up to 25% of compensation or $56,000, whichever is less.1

Individual 401(k)
Up to 100% of compensation or $56,000, whichever is less. 1

1 Contributions may be based only on the first $280,000 of compensation for 2019.

Take Charge of Retirement

No matter where your paycheck is coming from—traditional employment, side jobs and everything in between—a comprehensive plan is key to preparing for a comfortable retirement. Learn more about the options available to you so you have a strategy for retiring how you want, and when you want.

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Full-time? Part-time? Both?
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      IRA investment earnings are not taxed. Depending on the type of IRA and certain other factors, these earnings, as well as the original contributions, may be taxed at your ordinary income tax rate upon withdrawal. A 10% penalty may be imposed for early withdrawal before age 59½.

      Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.

      Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.

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