How Can I Save Enough For Retirement Without a 401(k)?

For many, 401(k) plans offer one-stop retirement planning: You contribute pre-tax money before your paycheck hits your bank account, lowering your tax bill and ensuring you don’t spend it elsewhere. Plus, many employers match a portion of what you put in (free money!) and offer features that automatically increase your contributions at specific intervals, helping you invest more, effortlessly.

But what do you do if you’re among the one-third of non-unionized American workers who don’t have access to a 401(k)? You’ve got options. Whether you’re an entrepreneur, freelancer or full-time employee, here’s how to build wealth on your own.

1. Create a retirement goal.

Before selecting an account, determine how much you really need to save in order to stop working one day, based on what you want your life to look like.

Think about how you spend today, and how that might change down the line. For example, you won’t be saving for retirement, so you can mark that item off your budget—but you could be paying more for health care than you do today. You can also use an online calculator to help nail down a number. With that in mind, you can develop a retirement strategy, using one of these account options:

2. Open an Individual Retirement Account.

Just about anyone with an income (or even a spouse with one) can open an IRA. Three popular types are a Traditional IRA, Roth IRA and SEP IRA.

Traditional IRA: You can contribute up to $5,500 ($6,500 if you’re 50+) in 2018, and contributions may be tax-deductible, depending on your income and spouse’s access to an employer-sponsored plan. Tap it early, and you’ll pay a 10-percent penalty, plus income taxes.

Roth IRA: If you meet the income requirements, you can contribute a max of $5,500 of after-tax income. Then your money grows, and can be withdrawn in retirement, tax-free. You can tap your contributions—but not any investment gains—anytime, without penalty.

SEP IRA: A simplified employee pension allows self-employed people (including side giggers and freelancers) to make big pre-tax contributions for themselves and any employees. You can contribute up to $55,000 or 25 percent of compensation, and you can deduct at least a portion of your contributions today and won’t pay income taxes until retirement.

3. Consider a Solo 401(k).

Free from age or income restrictions, a solo 401(k) plan permits any self-employed individual with an employer identification number to contribute up to $55,000 (plus $6,000 if you’re 50+) in 2018. Like IRAs, you can go the traditional route with pre-tax contributions, which are tax-deductible today. Or you can open a solo Roth 401(k) and contribute after-tax cash, which grows tax-free. The catch is that you can’t have any employees, aside from a spouse.

4. Invest in a regular brokerage account.

Once you’re in the hang of saving for retirement, you might need another account option that lets you invest more. If you don’t have any self-employment income and have already maxed out a traditional or Roth IRA, open a regular, taxable brokerage account.

There are no contribution limitations or restrictions around when you can access your money, but keep in mind that, if you’re investing for the long term, it pays to stay the course rather than making regular withdrawals.