Saving for Retirement on an Irregular Income

Millions of Americans identify as self-employed, part-time workers, or homemakers, are bucking traditional career paths either by circumstance or choice. And while saving for retirement may be more of a challenge without a steady paycheck, that doesn't mean you should lose sight of your financial future.

Even if your work doesn't fit the 9-to-5 routine, you can still stay on track for retirement. Here are a few scenarios where you can still use an irregular income to save for your goals. 

Leaving a routine job for something less regular requires preparation. Ask yourself: Do I have the assets to safely make the leap? Start with an emergency fund holding three to six months' expenses. 

If you're starting a business, you may want to double that amount—or go even further—before taking the leap from stable employment. You'll need to prepare for more than just your personal expenses during the transition, as you may end up taking on overhead expenses related to your business or other one-time costs needed to get you up and running.

Once you have established your personal safety net, you can start thinking about where to put away what income you can. 

Contractors and self-employed workers have options to save for retirement, including starting their own individual 401(k), a SEP-IRA, or a SIMPLE IRA. Compared to traditional IRAs, these retirement savings plans provide the potential to save more and reduce taxable income. If you max out one of these plans, you can still put additional retirement savings into a personal IRA.

If you're working for a company on a part-time or temporary basis, check to see if a company retirement plan is available to you. If that's an option, be sure to sign up during the next open enrollment period or when you become eligible and try to contribute enough to get the full match, if available.

If the company doesn't offer a plan, earned income from part-time work—including tips, professional fees, and self-employed income—allows you to open, and contribute to, your own IRA. By contributing to your own IRA, you may be able to get a tax deduction on the amount you contribute. 

If you're part of a single-income household, you might be able to still contribute to an IRA without any earned income by using the spousal IRA. This is basically a traditional or Roth IRA, but for nonworking spouses. 

There are some important rules to keep in mind with a spousal IRA: You must be married and file a joint tax return in order to open one, though the account isn't jointly held. Typical IRA income and contribution limits apply, and the total contributions of your IRAs can't be more than the taxable income reported on your joint return.

Even if your budget is tight, chances are you can still put aside something—even a small amount. To be sure, saving when you have an unstable or low income is a tremendous amount of work, but with the right mindset, savings can simply become a part of your budget.

For example, you could try making your savings automatic and out-of-sight like a subscription service, putting away $20—at first—each month into a savings account or IRA. Then, if you find that's comfortable, gradually increase that amount to fit in with the rest of your budget.

Everyone has a sweet spot where they can set aside funds for their future and take care of the bills. And Uncle Sam can help. 

You might also be eligible for a Saver's Credit—nonrefundable tax credit worth up to $1,000 for single filers, or $2,000 if married filing jointly, for mid- and low-income taxpayers who contribute to a traditional or Roth IRA, 401(k), SIMPLE IRA, SARSEP, 403(b) plan, 457(b) plan, or an ABLE account. (You also need to be 18 years old or older, not claimed as a dependent on another person's return, and not a student.) How much of the credit you receive will be based on the value of your adjusted gross income.

Regardless of the reasons, financial uncertainty is a familiar state for millions of Americans. You can't put off planning for your future until the perfect moment arrives because there is no perfect moment. Saving a little bit now is always better than waiting and saving nothing.