Updated: Mar 18, 2024

How to Save for Retirement When Working Part-Time

Find out how you can save for retirement when working a part-time that earns unstable income or when the job doesn't offer a retirement plan.
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When I was working part-time right after graduating college, the thought of saving for retirement never crossed my mind.

I was paying off student loans, searching for a full-time position and trying to have some semblance of a social life.

How on earth was I supposed to fit in a retirement contribution?

But years later, looking back at my old budget, I realized that I could have contributed about $50 a month.

That may not sound like much, but it adds up quickly and compounds over time.

If I had been contributing to my retirement account during that year of part-time employment, I would now have about $1,000 more in my retirement account - almost double the amount I would have contributed.

Does that sound a little more impressive?

If you’re working part-time, chances are you hope to find full-time employment in the future.

Or maybe you have other responsibilities at home, working enough to bring in some extra cash on the side.

Either way, you can afford to start saving for retirement right now. Here’s how to do it.

Ask About Company Options

As a part-time employee, you’re probably used to being treated differently than your full-time coworkers.

But when it comes to retirement plans, you could have the same benefits.

According to the IRS, workers who are 21 or older and have been employed for at least one year are eligible for a 401k if the company provides one.

However, they must have worked at least 1,000 hours during that year, which equals about 19.2 hours a week.

If you’re a new part-time employee with some flexibility as to how much you work, make sure to reach that hourly number before your year is up. Your company might also offer matching contributions, which can be a huge help.

Ask your HR rep what the company 401k plan is like, including what you should contribute to be eligible for the full employer contribution and how long the vesting schedule is.

A vesting schedule dictates how long you need to work at a company before 100% of the employer contributions legally belong to you.

Many companies have a graded vesting schedule, where you earn a portion of the contributions for every year of service. Try to stay long enough to earn 100% of the employer contributions.

It’s best to not access 401k funds before you retire.

If you withdraw money before age 59.5 for anything other than a hardship or a down payment on a house, you’ll pay a 20% penalty and income tax.

Open an IRA

If you’re not eligible for a 401k or your company doesn’t offer them, the only other option is to open your own Individual Retirement Account (IRA).

An IRA is like a 401k, except it’s not tied to any specific company. You can start and keep an IRA throughout your entire career, no matter how many times you switch jobs. Self-employed individuals and gig economy workers can also open IRAs.

To open an IRA, you first need to pick a firm.

Some of the most popular and reputable options include Charles Schwab, Fidelity, and Vanguard.

You can choose between a Roth or traditional IRA.


A Roth IRA allows investors to withdraw contributions tax-free in retirement, while those with a traditional IRA can deduct contributions on their taxes.

Traditional IRA Vs. Roth IRA

Traditional IRA Roth IRA
Contributions may be tax-deductible. Contributions are not tax-deductible.
Pay taxes upon withdrawal. Earnings can be withdrawn tax-free and without penalties if the funds were in the Roth IRA for 5 years and you've reached age 59 1/2.
You must be under age 70 1/2 to contribute. You can contribute at any age.
Required minimum distributions (RMDs) are required starting at age 70 1/2. No RMDs required.

There’s no right or wrong answer on what kind of IRA to choose.

A traditional IRA is generally better for people at the peak of their earning power, because they’ll be in a higher tax bracket and therefore save more on taxes.

A Roth IRA is better for those starting out in their careers because they don’t need the tax break.

When you create an IRA, you’ll choose which investments you want. You can choose between stocks, bonds or mutual funds. When trying to decide how much to carry in stocks, a general rule of thumb is to deduct your age from 100. If you’re 30, that means 70% of your portfolio should be in stocks or stock mutual funds.

If picking mutual funds doesn’t appeal to you, you can also hire a fee-only financial planner to advise you. They’ll be able to recommend funds that fit your personal situation.

If cost is an issue, you can use a robo advisor like Betterment, Wealthfront or Wealthsimple.

A robo advisor allows you to create an IRA in just a few minutes with a specific algorithm that recommends certain investments. You tell the robo advisor how old you are, how much you’ve already saved and when you want to retire. The robo advisor then picks the investments that best suit your situation.

A robo advisor has low fees and is easy to use.

Most of them have apps and a user-friendly interface. Some even provide one-on-one financial planning for an extra fee.

For a beginning investor or someone with little room in their budget, a robo advisor is the perfect blend of affordability and value.

Follow a Budget

Setting up a retirement account is easy.

You just provide your Social Security number, your bank account information and a starting deposit.

Regularly contributing to a retirement account, however, is much harder - particularly for part-time employees.

To stick to your retirement goal, you’ll need to create a budget.

A budget will help you plan out your expenses and make sure they don’t exceed your part-time income, allowing you to contribute the remainder.

The goal

First, decide how much you need to save for retirement.

A basic rule of thumb is to save between 10-15% of your income, but that might be difficult if you’re working part-time and supporting yourself.

Find a number you’re comfortable with. This should be an amount that allows you to mostly reach your retirement goals without falling behind on living expenses. Then, make a list of all your regular and irregular expenses, including those that only happen once or twice a year.

Compare your expenses to your income and see how much money you have left over. If that figure equals or is greater than what you need to save for retirement, you’re on the right track. If the number is less, you probably need to make some cuts to your budget.


Take a look at where your money is going and decide on a few cuts.

For example, do you need both a Netflix and a Hulu subscription? Do you need to buy organic produce from Whole Foods or can you shop at a cheaper grocery store?

This is a great opportunity to examine your priorities.

Making a successful budget on a part-time income is a challenge, especially if you have children or a spouse who earns less than you.

That’s why tracking your expenses and budgeting is so important, because there’s such a small margin of error.

Start Saving Anyway

If you do the math and find out you only have $50 a month to save for retirement, it might seem like retirement is a pipe dream.

After all, how much difference can $50 really make? Isn’t it better to enjoy that money and wait until you can save more?

You’d probably be surprised.

With the power of compound interest, saving a little bit early on can have a huge impact down the road.

Here’s an example. Let’s say you save $50 a month for five years in an IRA earning 7% interest, netting you $3,591.60.

After five years, you get a full-time job and can afford to save $150 a month. After 40 years, you have $456,081.29. If you hadn’t saved that $50 a month for five years, you’d only have $397,034.55.

With investing, time is just as important as money.

You may not be able to save a large amount early on, but think of it like sprouting a tree - what matters most is getting the seed in the ground.

Delay Social Security Benefits

If you’re having a hard time saving enough for retirement, there’s a trick to increase your Social Security payout.

By waiting until age 70 to claim your benefits, you can maximize the benefits that you receive.

If you’re eligible for Social Security starting at age 66, waiting until you’re 70 increases your monthly payout by 8% each year.

This strategy is even more critical for part-time employees who need extra help saving for a nest egg.

Because Social Security benefits are based on your total lifetime earnings, people who worked part-time hours most of their career will suffer more than those who worked 40 hours a week.

Delaying Social Security a few years means you’ll have to work or withdraw from your retirement account to pay for living expenses, which is a non-starter for some people. Still, the 8% guaranteed return is impossible to beat if you can wait it out.


There’s no secret to saving for retirement on a part-time salary.

The math can be tricky to manage, but it all boils down to maximizing your income, cutting your expenses and following an airtight budget.