3 Ways to Save for Retirement if You Don't Have a 401(k) at Work

Since saving for retirement is so important, you should take advantage of tax breaks for putting aside money for when you stop working. Unfortunately, that’s easier for some people than others.

If you have a workplace 401(k), you can sign up through your company and have money taken directly out of your paychecks to invest for your future. But what if you’re one of the millions with no 401(k) at work?

The good news is, you have other accounts you can invest in even if your employer doesn’t help out. You just need to pick the right one and get started.

To begin the process, follow these three simple steps:

Binder labeled retirement savings plan with calculator on top

Image source: Getty Images

1. Choose the right retirement savings account

Those who wish to save for retirement have severaltax-advantaged accounts to contribute to. For most investors, the primary options include traditional or Roth IRAs. But you may also be eligible to contribute to a health savings account (HSA).

HSAs are intended to help people with high-deductible health plans afford medical care. But you can use an HSA as an additional retirement account since you can withdraw money from it for any purpose after age 65.

The table below shows the different rules for tax-advantaged retirement accounts you may be eligible to contribute to, so you can pick the accounts that work for you.

If you’re self-employed, you also have other options,like a SEP-IRA, a Simple IRA, and a Solo 401(k).

Who Can Contribute

Tax Treatment

Income Limits in 2018

Contribution Limits for 2018

Catch-Up Contributions for 2018

Traditional IRA

Anyone under 70 1/2 who has taxable compensation and whose income isn’t too high

Contributions are made with pre-tax funds

Deduction phases out with modified income above $63,000 if single, or $101,000 if you’re married filing jointly and you or your spouse is covered by a workplace retirement plan

The lesser of you earned income or $5,500 combined contribution limit for traditional and Roth IRAs

Those 50 or over can make additional $1,000 catch-up contributions

Roth IRA

Anyone with taxable compensation whose income isn’t too high

Contributions are made with after-tax funds; you can take money out tax-free if you comply with requirements like waiting until the account has been open for 5 years

Ability to contribute phases out with modified *AGI above $120,000 for single filers, or $189,000 for married filing jointly or qualified widowers

The lesser of your earned income or $5,500 combined contribution limit for traditional and Roth IRAs

Those 50 or over can make additional $1,000 catch-up contributions

Health Savings Account

Anyone with a high-deductible health plan that has a minimum deductible of $1,350 for singles or $2,700 for families

Contributions are made with pre-tax funds; withdrawals for qualified medical expenses are tax-free


$3,450 for individuals and $6,900 for families

Those 55 or over can contribute an extra $1,000.

Chart Source: Author. *AGI: Adjusted gross income.

You can choose to contribute to multiple accounts for which you’re eligible. For example, you could contribute to both a traditional IRA and an HSA, and/or you can split contributions between a traditional and a Roth IRA so you get some tax breaks now and some tax breaks later.

If you’re not sure whether a Roth IRA or a traditional IRA is right for you, this guide to Roth vs. traditional IRAs can also help you decide.

2. Open up your retirement savings account

Once you’ve evaluated your options, you’ll need to open your retirement account to start saving.

Accounts can be opened with banks, brokerage firms, robo-advisors, and other financialinstitutions.

At a brokerage firm, you’ll have to manage your own investments. This process is simple if you invest in exchange-traded funds (ETFs) that give you exposure to broad classes of assets. You can find model portfolios here for advice on a mix of ETFs to easily build a diversified portfolio.

If you’re comfortable picking your own investments, check out this guide to selecting your first brokerage firm to find a discount broker. Key factors to consider include the commissions and fees you’ll pay, education and information available, ease of using the online platform, and the mix of investments.

Robo-advisors are another option to make investing easy. You provide information on your age and goals, and algorithms choose an appropriate investment mix. The downside: You pay a fee for a robo-advisor to manage investments, which may not be worth it since building an ETF portfolio on your own is so simple and easy.

3. Set up automated contributions

When you open your retirement investment account, it’s important to set up automated contributions to ensure you’re investing as much as you need for a secure retirement.

Ideally, you should invest as much as 15% to 20% of your income for your future, but not everyone can start saving this much. Look at your budget (or create a budget prioritizing saving, if you don’t have one), and decide how much you can invest. You can also check out this guide to deciding how much to save for retirement to set savings goals.

Then, add your bank account to your brokerage firm and set up transfers of your desired amount every payday, so you won’t have to force yourself to make the smart choice to invest each month.

This is similar tohaving your employer take 401(k) deductions from your paycheck, but you do the process yourself.

Saving for retirement can be simple

As you can see, saving for retirement without a 401(k) doesn’t have to be complicated. But it’s vitally important that you don’t wait — youcan’t live on Social Security alone.

You’ll be glad you started now, when you’re living your best life as a senior without any financial worries.

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