How to save for retirement if your employer doesn’t offer a 401(k)
For many people, employer-sponsored 401(k) or 403(b) plans are a central part of their retirement saving strategies. But as of 2021, 55.5 percent of Americans didn’t have access to a 401(k).
If you’re planning for your own retirement without a 401(k) plan—whether that’s because your employer doesn’t offer one or you’re self-employed—don’t panic. A 401(k) isn’t the only way to grow your nest egg. Here are a few options to consider as you look toward the future.
1. Open an IRA account
Individual Retirement Accounts (IRAs) are accessible to just about anyone—you can even open an IRA if you’re currently unemployed.
IRAs offer flexible investments, similar to 401(k)s. You could invest in a target fund tied to your retirement date, for example, or take a more hands-on approach to managing your investments.
Before you open an IRA, consider whether you want to open a traditional or Roth IRA account. Both offer different tax benefits: With a traditional IRA, you make pre-tax contributions, meaning you don’t owe income tax on the money you save now; you pay taxes on your distributions in retirement. With a Roth IRA, you make post-tax contributions today and enjoy tax-free distributions in retirement.
Keep in mind that the Internal Revenue Service sets limits on how much you can set aside in an IRA each year (it was up to $7,000 in 2024). An IRA is one way to put away money for retirement, but you may want to supplement it with additional savings strategies.
2. Invest in a brokerage account
Any investment account can serve as a retirement account if you treat it that way. Consider setting up a brokerage account specifically intended for retirement. You can schedule automatic contributions to the account using a cadence that works for you.
Unlike IRAs, which incur penalties if you make early withdrawals, a regular brokerage account gives you easier access to cash if you need to dip into your savings early for an emergency. That said, it’s a good idea to exercise discipline and avoid making unnecessary withdrawals from any account intended for retirement.
New to investing? Learn the basics of different investment types and consider working with a financial professional to decide on the right strategy for your situation. And remember, any investment comes with the risk of loss.
3. Explore retirement plans for self-employed individuals
If you’re self-employed or own a small business, you may be eligible to open a SEP IRA or SIMPLE IRA. Unlike traditional IRAs, these accounts are intended for self-employed individuals and business owners. They generally offer higher contribution limits than traditional and Roth IRAs and may also provide extra tax benefits for business owners.
4. Contribute to your Health Savings Account
You may already have a Health Savings Account (HSA), which provides a tax-advantaged way to set aside money for health expenses. But your HSA can also double as a retirement savings tool.
Unlike Flexible Spending Accounts (FSAs), HSAs don’t require you to spend the funds within a limited timeframe. If you save HSA money that you don’t end up spending on healthcare, you can hold onto your savings and let it grow over time.
Before age 65, you can only use HSA funds toward qualified medical expenses without incurring a penalty. But after age 65, you can use the money however you want and be taxed at your regular rate without penalty.
Confirm your eligibility to open an HSA before you get started. These plans are only available to people covered by a high-deductible health plan who are not enrolled in Medicare or claimed as a dependent on anyone else's tax return.
4. Ask your employer about other benefits
Even if your employer doesn’t provide a 401(k), you may have access to a pension plan, profit-sharing, or employee stock purchase plans. If you have access to other perks or benefits, you may be able to independently save toward retirement using one of the strategies outlined above.
If you aren’t sure what your company offers, reach out to your benefits coordinator for details.
Save for retirement without a 401(k)
A 401(k) account isn't the only way to save for retirement. By taking the time to research your options, you can create a comprehensive savings strategy to meet your financial needs in retirement.
