These are your investment options to prepare for retirement if you don’t have access to an employer-sponsored 401(k).

Over the last 40 years, 401(k) plans have become the most common type of retirement plan offered by private employers. According to the Investment Company Institute, as of September 2021, there will be $7.3 trillion worth of assets held in 401(k) plans, with about 60 million active participants.

But even with all this progress, many Americans still don’t have this kind of employer-sponsored retirement savings account. But that doesn’t mean you should stop saving for retirement altogether. There are many other ways to save money for the future.

Many Americans Still Don’t Have 401(k) Plans

About half of all American households have access to a work-based retirement plan, according to a report by the Stanford Center for Longevity. There are various reasons for this. In addition to the fact that employers are not currently legally required to provide retirement benefits such as her 401(k) plan, many Americans are self-employed or contract workers, so these plan is not available.

If you find yourself in this situation, the good news is that you have other options. Equipping yourself for retirement can be difficult, but you can save money for the future, start saving as early as possible to give yourself time, and reap more compounded benefits than years of savings. It is important.

“When it comes to retirement savings, there are many savings available to individuals without an employer-sponsored plan, the self-employed, or even those looking for savings outside of a traditional employer-sponsored 401(k). We have the means,” he said. Sri Reddy, Senior Vice President of Retirement and Income Solutions at Principal, said:

4 Investment Options to Prepare for Retirement

Some of the most popular account options include traditional or loss individual retirement accounts (IRAs), brokerage accounts, SEP IRAs, and even Solo 401(k). Each type of account has pros and cons, depending on your financial situation and needs.

1.IRA account

As the name suggests, an IRA is not tied to an employer. These are self-funded retirement investment accounts that offer tax benefits. This is explained below. The most common choices are the Traditional or Ross IRA.

A traditional IRA helps build a retirement nest by allowing account holders to make tax-deductible contributions. “You can deduct your IRA contributions from your taxes for the year you contribute, reducing your taxable income,” Reddy explains.

Money in this type of account is also allowed for tax deferral and will not be taxed until you make a withdrawal. Once you start using your traditional IRA funds, your distributions will be taxed based on your current income bracket. You can withdraw money without penalty from the age of 59 and a half.

A Roth IRA allows you to pay taxes on your donations, giving you several benefits. For example, distributions are tax-free because you have already paid taxes on the money. But the benefits don’t end there. “Donations are always ready to be distributed because they already pay taxes,” says Catherine Tierney, Senior Retirement Strategist at Edward Jones.

However, distributing too early before 59 ½ may be subject to taxes and penalties. This is also the case when he starts pulling money out of Roth less than five years after opening.

However, there are some distinct differences when using Roth to prepare for retirement. Most importantly, there are income limits for those who are eligible to use a Roth IRA.According to the IRS, income must be less than $228,000 for married couples and $153,000 for singles in 2023 to use a Roth IRA. must be

Whether you use a traditional IRA or a Roth IRA, it’s also important to understand one of the main drawbacks of this type of account: the low annual contribution limits. According to the IRS, the maximum annual contribution limit for 2023 is $6,500 for individuals under the age of 50 and $7,500 for individuals over the age of 50.

2. Traditional Taxable Investment Account

A taxable investment account, often called a brokerage account, is also an option for saving for retirement if you don’t have access to a 401(k). A brokerage account allows you to increase your retirement benefits by assembling a portfolio of assets. This includes stocks, bonds and mutual funds.

Saving for retirement using a traditional investment account has many benefits, including being able to choose the type of assets you need. Additionally, there are no income limits when opening a brokerage account. This means that, unlike the Roth IRA, it is open to everyone, regardless of income.

“Although brokerage firms have limited tax benefits, they do have some advantages in that they are less restrictive and more flexible than vehicles like IRAs,” says Reddy. “With a brokerage account, you can withdraw your money at any time without taxes or penalties. One, plus, if you’ve exhausted other tax-exempt contributions, such as an IRA, a taxable investment account like a brokerage firm allows you to save more with almost no limits. ”


If you’re a business owner, self-employed, freelancer, or contract employee, a Simplified Employee Pension (SEP) IRA plan is another option.

“SEP IRA plans offer many benefits,” says Tierney. “They are relatively simple and inexpensive, require no special filings or administration with the IRS, are tax deductible for employers, and do not require annual contributions to the plan.”

SEP IRAs generally follow the same investment and distribution rules as traditional IRAs. In other words, profits are tax deferred and distributions are taxed as ordinary income. In addition, distribution is accepted at any time. However, if you withdraw your funds before 59 ½ and do not qualify for the penalty exception, you will be subject to a 10% penalty on pre-tax dollars.

“In general, individuals should start taking the required minimum distribution (RMD) from the plan the year they turn 72 and each year thereafter,” Tierney adds. “For SEP IRAs, there are no exceptions to her RMD rule for non-retired individuals.”

4. 401(k) only

Finally, a sole 401(k) (sometimes called a one-participant 401(k)) is if you run a business that does not include employees or if your only other employee is a spouse. Worth considering in some cases.

“If you don’t plan to hire other employees and you’re just treating the savings for yourself, a stand-alone 401(k) can be a great option,” says Reddy. “These types of plans can save up to $22,500 in 2023 in employee deferrals and an additional 25% in employer liability.”

Benefits of this account include that your “employer” contributions are tax deductible for your business and earnings are tax deferred until withdrawn.


Investing for retirement is one of the most important steps in building a healthy financial future. Even if you don’t have an employer-sponsored 401(k), you should contribute as much as you can personally to your retirement and start as soon as possible. There are options for all kinds of financial needs, and many include tax incentives.

“Given life expectancy, retirement could be 25 to 30 years, possibly longer,” says Tierney. “Social Security helps meet some of your income needs in retirement, but it is not designed to meet all income needs. On average, about 30% of your pre-retirement income. It replaces 40% from , so it’s important to focus on what you need to save and invest to meet all your retirement needs.”

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