How to Save for Retirement without a 401(k) should by the next thought on your mind and If you are self-employed or your employer doesn’t have a 401(k) plan, you can still save for retirement.
Don’t let that keep you from saving and investing for retirement. Some tax-advantaged accounts work best for saving for long-term goals like retirement.
If you are in these shoes, then you are in the right place. This article will provide you with some of the best places to save for retirement without a 401(k). So read on!
How to Save for Retirement without a 401(k)
If you can maximize the advantages that come from other retirement accounts asides from 401(k), you’ll still be very comfortable financially after you retire. Below are some alternative ways to save for retirement without a 401(k)
Contribute to a Traditional IRA
You can also set aside some cash in a traditional IRA and the funds will grow tax-deferred. This means that you won’t pay taxes on the cash before or while it is in the account.
However, income taxes will be due at retirement. This means that you’ll only pay taxes when you want to withdraw your savings at retirement. With a traditional IRA, you could be able to contribute up to $6000 or more depending on your age in preparation for retirement. This is one way that you can save for retirement without a 401(k) plan.
Consider a Roth IRA
Roth IRA is also another alternative option for a 401(k) account. These accounts have the same contribution limit as traditional IRAs. However, they are taxed differently. In a Roth IRA, you’ll contribute after-tax dollars.
Furthermore, when you want to withdraw the money at retirement, you’ll not need to any taxes again. This account can be of huge advantage to you especially if you expect to have a higher tax bracket at retirement. More so, similar to the way 401(k)s operate, you can even automate the contribution.
Consider a SEP IRA
This is also an alternative for 401(k) if you are self-employed. A simplified employee pension IRA works well for those who own their private businesses, are freelancers, or have side jobs.
Similar to a traditional IRA, the funds in a SEP IRA grow tax deferred. However, SEP IRA has a higher contribution limit than a traditional IRA.
Save in a Solo 401(k)
This is another way you can save for retirement if you are self-employed. However, this retirement account is only for self-employed individuals who have no employees. This means that if you have employees working under you, you won’t be allowed to open the account.
However, a couple running a business together can save in this account. Solo 401(k) offers flexibility in investment choices. Contributions to this account are tax deductible. Furthermore, it could come to offer you the option to invest in real estate and/or cryptocurrency.
Taxable Brokerage Account
Taxable brokerage accounts do not offer tax advantages like deductibles or tax-free growth. However, they are another option to consider if you are self-employed or your employer doesn’t have a 401(k) plan.
With this account, you can invest in anything you want to and you can also choose a broker that’s best for you. Although investments in taxable brokerage accounts are prone to risk, you can invest in assets that best suit your risk profile.
However, before you invest in this account, you have to consider your time horizon and how much risk you want to take.
Health Savings Account (HAS)
You might think that health savings accounts are for healthcare only. However, there is more to them than just that. Health savings accounts offer huge benefits for those who accumulate money in their accounts until they retire and become covered by Medicare.
In addition to this, your contribution to a health savings account is tax-deductible. The funds you have in an HSA grow tax-free. Furthermore, withdrawals from this account are tax-free if you use the money to pay for healthcare expenses like vision and dental care.
HSA could be a valuable way to boost your retirement savings. You should consider it if you are self-employed or your employer doesn’t have a 401(k).
Consider Tax-Differed Annuities
This is also another alternative way to save for retirement. Tax annuities are offered by insurance companies. Annuities are tax-deferred and they allow you to invest in varieties of investment options to reach your retirement goals.
FAQs
Can You Retire without a 401(k)?
Yes, you can. If you do not have a 401(k), you can still save in other tax-advantaged savings accounts. Some other alternatives include traditional and Roth IRAs, and health savings accounts.
How Do People Retire without Savings?
Although it’s very risky to retire without savings, below are some ways people without savings retire
- Make every dollar count.
- Downsize your house.
- Pick your next location with savings in mind.
- Trade your equity for income.
- Take advantage of healthcare savings programs.
- Delay retirement and social security.
What Happens if I Run Out of Money in Retirement?
If you’ve already started to receive your social security payments, the income will continue for the rest of your life. Hence, you’ll still have some financial security after retirement. However, you have to find ways to keep your expenses below the amount you receive from social security.
When Can I Take My Social Security Benefits?
You can start receiving your social security retirement benefits as early as age 62. However, you are only entitled to full benefits when you reach your full retirement age. Moreover, if you can delay taking social security till you are up to age 70, your benefit amount will increase.
What Do Seniors Struggle With Most?
Some of the most common problems ageing adults struggle with are
- Memory Concerns
- Depression
- Loneliness
- Urinary incontinence
- Falls
- Pain
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