If You Don’t Have a 401(k), Try One of These 4 Retirement Accounts Instead

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A 401(k) account is a great option for retirement savings — provided you have access to one through your employer. But if your employer doesn’t offer the option, or you’re self-employed, you’ll need to consider other retirement account options.

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Luckily, there are alternative ways to set aside money for retirement. Here’s a quick look at retirement plan options if you don’t have a 401(k).

1. Individual Retirement Accounts

IRAs are probably where most people gravitate if they don’t have a 401(k). However, not all IRAs are the same. Traditional IRAs let you grow your retirement savings tax-free, meaning you don’t have to pay taxes on your contributions. But you’ll have to pay taxes on withdrawals when the time comes, so these are a better option for younger people. With Roth IRAs, you pay taxes on your contributions but get tax-free withdrawals in retirement.

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The downside with IRAs is that you can only contribute up to $6,000 in 2022, or $7,000 if you’re 50 or older, Motley Fool reported. By contrast, there’s a $20,500 contribution limit for 401(k)s, or $27,000 for adults over 50.

2. Simplified Employee Pension IRAs

SEP IRAs are designed for self-employed individuals. You’re eligible for one if you make any kind of freelance, side hustle or independent contractor income, even if you’re employed somewhere else. Better yet, you can contribute a lot more with SEP IRAs than other IRAs. In 2022, you can contribute up to the lesser of 25% of your net self-employment income, or $61,000 with many self-employed retirement accounts, according to Annuity.org.

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3. Cash Balance Penson Plan

This type of plan lets self-employed individuals catch up on retirement savings by contributing a set percentage of their annual earnings, plus interest. Contribution limits increase as you get older. You can choose a fixed or variable annual interest rate in the form of a credit. You also have the option of withdrawing your money as an annuity or as a lump sum at retirement.

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4. Taxable Brokerage Account

These aren’t retirement accounts per se, but they do offer a way to grow your savings faster than you would with a standard savings account. And you can dedicate the money to retirement savings if you want to keep it separate. You don’t get the same tax benefits as you would with a 401(k) or IRA, but you can save on taxes if you hold onto your funds for at least one year before withdrawing them, Motley Fool noted. After that, your earnings are subject to long-term capital gains tax, which means you’ll pay a lower tax rate that you would with a short-term capital gain.

With taxable brokerage accounts, you can invest and withdraw your funds whenever you want to, and there are no contribution limits. And unlike some retirement accounts, you won’t face penalties if you withdraw funds before age 59 1/2.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

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