How To Save for Retirement Without a 401(k)

Whats your plan for retirement.
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The company 401(k) is just one option available for building wealth. If you work for a company that does not offer a 401(k) matching program, or if you are self-employed or don’t have access to a group-sponsored retirement plan, you can still build wealth by opening these retirement and non-retirement accounts.

Alternative Ways To Save for Retirement

If an employer-sponsored 401(k) isn’t an option for you — or if you just want to have more than one retirement account — you should open another retirement account as soon as you can. Consider these ways to save for retirement without a 401(k):

  1. Traditional IRA
  2. Roth IRA
  3. SEP IRA
  4. Solo 401(k)
  5. Health Savings Account
  6. Long-term investments

Qualified and Non-Qualified Accounts: What’s the Difference?

Before you look at the different types of accounts you might open, Julian Schubach, vice president of wealth management at ODI Financial, said it’s important to differentiate between qualified and non-qualified accounts. 

Qualified Accounts

Schubach defined a qualified account as anything that can be considered a retirement account. This is an account with tax favorability and specific rules that govern the use of your savings.

A few examples of qualified accounts include a traditional IRA, Roth IRA, SEP IRA and Solo 401(k).

Non-qualified Accounts

A non-qualified account is a non-retirement account. This is money you already have paid income taxes on and is subject to additional taxes only on investment gains.

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Most non-qualified accounts may be withdrawn from at any time with no penalties, unless you purchase a product such as a CD or annuity that may carry a surrender charge.

Traditional IRA

If you do not have access to a 401(k) program, Schubach recommends opening an individual retirement account. You may choose between a traditional IRA and Roth IRA. 

Traditional IRAs are tax-deferred, meaning you may be eligible for a tax deduction each year you contribute. Greg Middendorf, CFP and partner at HCM Wealth Advisors, said earnings grow tax-deferred, but you’re subject to ordinary income taxes when you make a withdrawal. Those who withdraw money before age 59½ may be hit with a 10% penalty, which Middendorf said is a good inducement to keep your money growing.

You can contribute up to $6,500 to an IRA in 2023. Those age 50 or older can make up to $1,000 in additional, catch-up contributions.

Roth IRA

You will not receive a tax deduction when contributing to a Roth IRA account. However, Middendorf said you can withdraw earnings tax-free at age 59½ if you have held the Roth for five years.

“You’re subject to a 10% penalty if you withdraw earnings before 59½, but there’s never a penalty for withdrawing the money you contributed,” Middendorf said.

Contributions to a Roth IRA count toward the $6,500 — or $7,500 if you’re age 50 or older — total allowable IRA contribution for 2023.

Brian Carney, co-founder and CEO of RiversEdge Advisors, said opening a Roth IRA is a tremendous way to save for retirement, even if you are offered a retirement plan through your employer.

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“As long as the investor is under certain income limits, they have the ability to contribute to the maximum limit to a Roth IRA using after-tax dollars, meaning it has already been taxed through a paycheck,” Carney said. “Those dollars will grow completely tax-free and can be distributed at required ages completely tax-free. By paying taxes on the contributions and none of the growth, it is akin to paying tax on the seed, not the harvest.”


Carney said freelancers may use several different options to build wealth without traditional 401(k) plans. First, investors must ask themselves if they would like to save more than $6,500 in a tax year. If the answer is no, their best bet may be to open a traditional IRA. If they hope to contribute more than $6,500, a Simplified Employee Pension IRA — SEP IRA — is likely the best option.

If you are a freelancer or earn 1099 income, Schubach said you may be eligible to contribute 25% of your adjusted gross income, up to $66,000, into a SEP IRA account. SEP IRA accounts are tax-deferred and provide a potential tax deduction each year a contribution is made.

If a freelancer has any employees, Carney said the SEP IRA will require the owner to make contributions for their employees that are the same percentage of income they contributed for themselves.

Solo 401(k)

A Solo 401(k) is ideal for those who have an LLC or corporation and are the sole employee taking W-2 income. “This account is just like a traditional 401(k) but does not carry the same administrative costs or requirements for accounts under $250,000,” Schubach said.

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As the only participant in your Solo 401(k), you can make up to $22,500 in elective deferrals for 2023, plus up to 25% of your net self-employment earnings. Net earnings are your business income less one half of your self-employment tax and your personal contribution. The total maximum contribution is $66,000 for 2023, not including catch-up contributions, according to the IRS.

You can invest Solo 401(k) funds in either a traditional or Roth IRA.

Health Savings Account (HSA)

If you have a qualified high-deductible health plan through your employer or as a self-employed individual, you may qualify for a health savings account (HSA).

“Similar to an IRA, an HSA lets you make annual contributions and offers significant tax perks,” Middendorf said. “It’s a way to save for current healthcare costs as well as for the future and can be a great complement to an IRA.”

If eligible, you can contribute up to $3,850 with self-only coverage and up to $7,750 with family coverage in 2023. Although you can withdraw the funds at any time, you’ll pay income tax and a 20% penalty on withdrawals you make before age 65 that are not used exclusively for qualified medical expenses. After age 65, you’ll be taxed on non-qualified withdrawals but won’t incur a penalty.

Build a Portfolio of Long-Term Investments

Once you’ve opened a tax-advantaged retirement account, you can continue building your wealth through long-term investments. Doug “Buddy” Amis, CFP, president and CEO of Cardinal Retirement Planning, recommends investing in tax-efficient index funds. Like the Warren Buffett portfolio that uses the S&P 500, index funds are a straightforward path to wealth accumulation.

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“Unlike actively managed funds, investing in tax-efficient index funds for the majority of your portfolio will work whether or not it’s in a 401(k) plan or Roth IRA,” Amis said. “Certain funds can be extremely tax-efficient, generating only minimum tax drag because dividends tend to be taxed at the preferential qualified tax rate and capital gains distributions are minimal. This helps you keep more money in your pocket and experience the power of compound interest.”

Which Account Is Best To Build My Wealth?

The rules for opening an IRA can be quite tricky. You do not want to accidentally fund the wrong account and have to pull back your contribution. If you are unsure of whether to open a traditional or Roth IRA account, Schubach recommends speaking with a CPA or accountant before establishing and funding a qualified account.

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Here are the answers to some common questions about saving for retirement.
  • Can you retire with no 401(k)?
    • Yes, you can retire without a 401(k), but you should have some kind of retirement account. The most common alternative to a 401(k) is an IRA: You can contribute up to $6,500 every year – $7,500 if you're age 50 or older.
  • What is the best way to save for retirement without a 401(k)?
    • The best way to save for retirement will depend on your finances and lifestyle, but one good option to consider is an IRA, either Traditional or Roth. If you're self employed, you should also consider a SEP IRA.
  • What is the smartest way to save for retirement?
    • The best way to save for retirement is to start early – and if you didn't start early, start now. Contribute part of each paycheck to a retirement savings account and consult with a financial advisor to make sure you're making the best decisions for your financial stage.
  • Can you retire comfortably with a 401(k)?
    • You might be able to retire comfortably with a sizeable 401(k), but you'll be better off if you have multiple retirement accounts to save more – and you'll have more options when it comes to withdrawing funds during your retirement with multiple types of accounts, as well.
Are You Retirement Ready?

Daria Uhlig contributed to the reporting for this article.

Information is accurate as of April 28, 2023.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


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