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What To Do If Your Employer Doesn’t Offer a 401(k) Plan

About 75 percent of Americans have done at least a little saving for retirement. Yet only 55 percent of full-time employees in America contribute to an employer-sponsored 401(k) or 403(b) retirement plan, according to reports by the Employee Research Benefit Institute.

Although some employees choose not to contribute their employer’s 401(k) plan, other employees would love to invest in a 401(k) plan but can’t; their employer doesn’t offer one. In some cases, an employer may simply choose not to offer a 401(k) plan. Or, you may not be eligible for the plan because you either work part-time or haven’t worked long enough to qualify.

What’s the big deal about a 401(k) anyway?

Among ways to save for retirement, the 401(k) plan is the undisputed king. That’s because:

So what if you’re not eligible?

If you don’t work for an employer that offers a 401(k) plan, your retirement options are limited. The IRA is going to be your best friend, as long as you don’t earn more than IRA income caps. You can choose to contribute pre-tax dollars to a traditional IRA and pay taxes on withdrawals in retirement or contribute post-tax dollars to a Roth IRA from which you can make tax-free withdrawals in retirement.

Again, you can only put in up to $5,500 per year. There is, however, some good news: If you forgot to make IRA contributions throughout the year, you can count IRA contributions you make up to April 15th towards the previous tax year.

Or you’re self-employed?

If you’re self-employed, a SEP-IRA may allow you to save more than $5,300 a year for retirement. The exact amount you can save is a percentage of your annual profit, and it gets complicated. If you’re self-employed, setting up a SEP-IRA for yourself can be worthwhile, but you’ll want to enlist a tax pro to help.

Unfortunately, that wraps up the tax-advantaged retirement savings vehicles. If you’ve maxed out an IRA and are still thirsty for more retirement savings, you’re going to have to look to regular old taxable brokerage accounts.

If you want to set up an automatic investment plan, look to no-load mutual funds to save on fees. If you’re going to invest a lump sum, exchange-traded funds (ETFs) are a good bet.

Finally, you may come across annuities as an alternative way to save for retirement, especially if you enlist a financial advisor working on commission. With annuities, the insurance company essentially takes on the risk of investing your money for you. You make regular contributions until you retire, at which time the insurance company guarantees you a certain payout. Although hey can seem like a good deal when spun by a master salesman, the fees woven into them usually negate any benefits they offer.

What about you? Do you save for retirement without a 401(k) and in addition to an IRA? How?

Published or updated on December 23, 2009

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


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  1. Lisa says:

    My job doesn’t offer a 401k and I am not married (yet). My situation is that I want to save more than the $5000 IRA maximum but quite honestly do not know much about stocks. I have my IRA in a semi-aggressive fund. Just $15,000. I know this is behind for my age of 28. Is the semi-aggressive fund appropriate for my age? And I want to save a little more than my IRA allows. Any good suggestions?

  2. Lisa says:

    That is a great idea! Thank you.

  3. Mrs. Money says:

    My employer offers a 401k program but my hubby’s doesn’t. We have a Roth IRA for both of us and just contribute more to my 401k!

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