How You Can Save for Retirement without a 401k
Where it has become more common for companies to offer their employees a retirement vehicle like a 401k or a 403b, especially as a number of them have taken away guaranteed pensions, there are still numerous companies that do not offer this benefit to their employees. One of the best retirement planning benefits that a 401k provides individuals is the automated investment solution as well as the tax benefit of your contributions.
If your employer does not offer you this option, don't fret, you can still plan for retirement on your own and get some of these benefits on your own and typically for a lot less expense.
Most IRA account providers allow you to open up an account for as little as $1,000. Once you have achieved this investment minimum, many allow you the option to automatically deduct funds from your checking account to invest in your retirement account. The automatic deduction function is a great way to remove the thought process and effort of remembering your retirement account. You can rest assured knowing that you are contributing to your retirement nest egg every month without a second thought. In addition, these regular contributions should come at no additional out of pocket cost to you.
Depending on your income and age, you may also have the ability to use your IRA contribution as a tax deduction when you file your taxes. You should consult with the IRS website, your tax planning software or your accountant to determine if you qualify for this deduction.
If you own your own business, you have a number of other retirement alternatives like a Simple IRA, a SEP IRA, a solo 401k, or a defined benefit plan. Each of these alternatives provides various pros and cons, so you should confirm with your accountant, which would work best for you as a business owner.
Whether you have an individual retirement account or one for your business, though, IRA providers offer a wealth of investment solutions that you typically would not have in a 401k plan. Most employer sponsored 401k plans only offer a handful of funds or ETFs to their plan members and they also charge a fee to manage these plans on behalf of the members.
If you have your own account, you will not only have a number of investment alternatives, but you can keep the fees low, especially if you are using one of the providers we suggest in our top five. Most of them will allow you to open and maintain an IRA account at no additional out of pocket expense, which is a great benefit over the fees that you would pay in your 401k plan.
So if you are disappointed in the fact that you do not have a 401k with your employer, do not fret for long. You can still open your own retirement account and enjoy greater flexibility in investment options, pay less in fees over time, automatically contribute and enjoy tax benefits where available.