What to do if your company doesn’t offer a retirement plan

A friend of mine is about to start a new job with a company that offers no company retirement plan. This is a tough situation to be in, mostly because it means that saving for your retirement is now in your hands. Most companies make it easy – you set your contribution amount, and you get that money taken out of our paycheck before you even see it. What do you when this isn’t the case?

What are my options?

401k-alternativesFirst of all, this is by no means an exhaustive list of what you have to do. This is merely a means of being self-informed about the type of options that do exist if you find yourself in a similar situation. I believe saving for retirement should be very straight-forward and easy to understand. The most important thing is to be prepared for retirement; there are many paths to achieving that. There are more options for those who are self-employed or are small business owners, but for the sake of this post I’m sticking to an “employer offers no plan” situation. Basically, in lieu of a 401K, you really have two options:

Open an IRA account. Generally, there are two different types of individual retirement accounts: Traditional (pre-tax) or Roth (post-tax). Regardless of if you do one or a combination of both, the maximum contribution for an IRA is capped (for 2017) at $5,500 a year. Compared to the $18,000 limit for 401k, that’s really not very much. Because there are tax benefits with a Roth IRA that you can’t get with the next option, I suggest contributing to a Roth account over a Traditional IRA. Why choose a Traditional account? If you believe you’ll be paying lower taxes on your income when you retire compared to now, then a Traditional IRA may be better for you. A Traditional account will also take less money to reach the $5.5K contribution limit than a Roth IRA. Personally, I have both. You can learn more about the differences between the two accounts here.

Open a personal brokerage account. Through companies like Betterment and Wealthfront (there are many more), you can open a personal investment account and invest it the same way you would a retirement account. The catch? Because it’s not a 401K, personal investment accounts aren’t subject to some the same tax benefits. However, you’ll have much more flexibility with this account – you can deposit as much as you want into it, and can withdraw money as needed.

For the non-investing inclined, there are alternate solutions you can use:
1. Deposit money into an online savings account
2. Open a CD (certificate of deposit)
3. Buy Bonds (my least favorite option, but definitely low-risk)
4. Alternative investments (like getting into real estate)

What are these options? Because we’re talking about your retirement account here, it really shouldn’t matter if your money is easily reachable or not. There’s no need for liquidity. While these options are lower risk, they also typically have lower interest rates – meaning you get a lower rate of return. The exception to that is real estate. Done right, it can provide a steady stream of semi-passive income; however, I’m guessing that most of you do not have the scale to get into real estate; I know I sure don’t. It’s important to have a balance of various types of accounts to be financially healthy, but your retirement money belongs somewhere where it can be allowed to grow over time with the magic of compounding interest (and doesn’t tempt you by being too accessible).

Of course, the final option is to find a new job at a company that has a retirement plan set up. While it shouldn’t be the deciding factor, it’s always smart to look not just at a position’s salary, but also the value of a company’s benefits package.


  1. I didn’t have a full-time job for about a year. So I focused on maxing out my Roth and then putting the rest in regular savings. I did learn at the time, that the $5,500 max included both the Roth and Traditional. I tried to max out $5,500 for both 🙂

    1. Author

      I thought the same thing when I opened my first IRA! I’m sure that we weren’t even in the minority with that kind of thinking; there’s so little clarity (and too much fine print) on retirement rules and regulations. I guess that’s part of why there’s such a huge blogging space around personal finance 😀

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