A recent report from The Bureau of Labor Statistics showed there were 8.4 million people working multiple jobs in the U.S. and multiple jobholders now account for 5.2% of total employment.

Multiple job holders have accounted for 5.0% or more of total employed persons for 11 straight months, the longest streak since the runup to the 2020 pandemic. That is a sizable increase from a pandemic low of 4% in April 2020, according to the data. This figure averaged 4.94% from 2010 through 2019. There’s even a TV show called Side Hustlers, a competition show that follows the mentoring of female entrepreneurs to grow their side hustles into potential full-time businesses.

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The cause for this increase of multiple job holders isn’t likely one factor but a shifting labor market with how people work, remote work, and higher inflation coming out of the Pandemic likely played a role.

While prices of many items have come down, many are not feeling the impact of cooler inflation. Mainly because prices for essentials are still increasing. According to the Labor Department’s index rent and electricity bills are up 10% or more over the past two years, and car-insurance costs are up nearly 40%, according to the Labor Department’s index. A recent Wall Street Journal article reported that haircuts and other personal care services have risen in price over 27% from 2019 to 2024.   

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A silver lining to the increase in working multiple jobs is the increased ability to save and invest and lower one’s Federal tax bill liability. Those looking to save into a retirement plan on top of their traditional work plan may want to consider a SEP-IRA, Solo 401(k) or Cash Balance Plan. 

Below is a brief overview of each option.

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SEP-IRA

A SEP-IRA is adopted by business owners to provide retirement benefits for themselves and their employees. The cost of opening and maintaining a SEP-IRA is minimal as long as you don’t have any employees. If you do have employees who have worked for you in three of the previous five years and are at least age 21, they must all receive the same benefits that you do.

The benefits are payable by the company (you). The 2024 maximum annual contribution to a SEP-IRA is the lesser of 25% of self-employment net income, or the IRS limit of $69,000, which is much larger than a Traditional IRA which limits contributions to $7,000 for 2024 for those younger than 50, or $8,000 if over 50. Contributions to a SEP-IRA are tax-deductible in the contribution year.

A SEP-IRA is a popular option because of its ease. You can open an account yourself and there are minimal  costs.

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Solo 401(k)

A Solo or Individual 401(k) is a qualified retirement plan for employers with no full-time employees other than the business owner and spouse. 

Self-employed workers who qualify for this type of plan can receive the same tax benefits as a Traditional 401(k) plan. 

The total allowable contribution, for 2024, is the same as a SEP-IRA. The difference between a SEP-IRA and a Solo 401(k) is that you, as the employee, are allowed to make elective deferrals up to 100% of your earned income up to the 2024 annual limit. The limit is $23,000 or $30,500 if you are age 50 or older regardless of the company’s income. 

For those employed by another company and contributing to another work 401(k), your elective deferrals are in aggregate, per person.

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Cash Balance Plan

If your side hustle income is generating significant cash flow and you want to save above the numbers mentioned above, give some consideration to a Cash Balance Plan. 

Cash Balance Plan is a defined benefit plan, which promises a specific income. An employer (in this case, that’s you) makes annual contributions to the plan to ensure that the plan assets will be sufficient to pay the promised future benefit at retirement. 

As part of this process, the plan is required to have an actuary perform annual valuations in which the present value of each worker's accrued benefit is estimated. 

These plans are more expensive to set up and maintain, but this option allows you to contribute more than either a SEP-IRA or a Solo 401(k). A Cash Balance Plan is designed to reach a specific dollar amount upon retirement. The maximum annual contribution to a Cash Balance plan in 2024 is up to $420,000. This is based on the assumption of maximum compensation. 

A key consideration is this plan is not the correct choice if you only expect one or two years of high income, as the IRS usually requires these plans to remain open and continually funded for at least three to five years.

Whichever plan you decide on, speak to a financial advisor and accountant for proper guidance to structure the plan or plans you choose to achieve the desired goal.

Feel free to reach out to myself and the team at Savvy for help.

All advisory services are offered through Savvy Advisors Inc. (“Savvy Advisors” or “Savvy”), an investment advisor registered with the Securities and Exchange Commission (“SEC”). Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.