Future Investing

How to Save for Retirement if Your Company Doesn’t Offer a 401(k)

Everyone gets excited when they start a new job. New opportunities, new challenges, and new retirement plans. Unless there are not… Some jobs don’t offer a 401(k) or other type of retirement plan, but it is still very important to save for your future even if your employer is not helping.

Start Somewhere

The biggest step to take is step one. Open an investment account and start investing in it automatically every payday. Even if it is only $5 a month, the most important part of saving for your retirement is getting started.

If you are a young professional , start by opening a Roth IRA at a full service, discount broker like Fidelity or Charles Schwab. Both Schwab and Fidelity offer online access to your accounts and give you a load of investment options. Another popular option for people looking for low-fee mutual funds is Vanguard.

Grow Your Contributions Over Time

If you invest automatically, you will get used to not having the money and live within your new means. If you ever get a raise or find you have the ability, increase what you are putting into your retirement accounts each payday.

Even though my company does have a 401(k) plan, I still choose to invest extra into a Roth IRA each payday. I invest enough to max out the Roth IRA each year (currently $5,500 per year), and put the rest of my retirement savings into my 410(k).

For my investment into the Roth, I use my company’s direct deposit to split the deposit into two accounts. The Roth IRA amount is fixed and sent to my Schwab Roth IRA automatically and the rest goes into my checking account.

If you don’t have direct deposit or can’t split it between two accounts, you can use automated investing plans like the one offered by Capital One 360 (automatically move cash from your checking into your ShareBuilder account) or set a recurring transfer at your investment institution.

Pick Smart Investments

Just putting money into an account is a good start, but it is not the best way to manage your investments for your future.

I like using a combination of target date funds and other low fee mutual funds for my retirement accounts. I use the free tools at Empower to help me keep my fees and investments on track for my goals. Late last year, I used Empower to help me save over $300 in annual fees on my investments.

In my Roth IRA, I am primarily invested in the Vanguard 2050 target date fund (VFIFX) and also hold shares in the Vanguard high dividend yield fund (VHDYX). In my rollover IRA, I am invested in a mix of Schwab and Vanguard funds and Berkshire Hathaway B shares.

Rollover When You Leave

Whenever you leave an employer, make sure to take your 401(k) with you. You can rollover your old 401(k) into a new IRA to avoid tax penalties. Company sponsored 401(k) accounts are notorious for high fees and few investment options.

With your own Rollover IRA, you control the investments and shouldn’t have to deal with any account fees. I like having more control and lower costs!

How do You Invest for Retirement?

What strategy do you use to invest for your future? Do you have any questions? Please share in the comments.

Image by StockMonkeys.com / flickr

8 thoughts on “How to Save for Retirement if Your Company Doesn’t Offer a 401(k)”

  1. My goal is very early financial independence, so I keep my contributions to retirement accounts at a minimum. I do use my 401k because there is a match and I don’t like passing up free money. If I had a non matched 401k or no 401k, I would stick to a traditional IRA.

    1. I have thought about the risks of getting money stuck in retirement accounts if I retire early, but decided it is worth it for the extra security. Plus, with a Roth, you can take out any contributions with no penalty (but not gains) at any time.

      1. Even if you max out a Roth, it’s not enough to cover early retirement for more than a year or two until you have to start dipping into gains. The Roth strategy could give you temporary FU money, but never enough to just walk off your job and never have to fill out another job application for the rest of your life.

  2. Emily @ evolvingPF

    We don’t have access to 401(k)s so we save for retirement in Roth IRAs. If we wanted to save more than $10k/year (which we don’t right now) we would just use taxable brokerage accounts with tax-efficient investments. If we got into that situation and had any self-employment income we would probably try to set up a retirement account so we could contribute through that as well.

      1. Emily @ evolvingPF

        The universities don’t extend their 403(b) benefits to grad students or, sometimes, even postdocs. If you go from college to grad school to a postdoc straight you could be 30 to 33 before you have access to that type of account (if you are unlucky with how the universities designate you), and if you stay on fellowships the whole time you can’t even contribute to a Roth IRA unless it’s a spousal one. Insane.

        1. It would be nice if schools started doing more to help their student teachers with long-term planning. Until then, props to you for doing the right thing!

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