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

Future Investing

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 Personal Capital to help me keep my fees and investments on track for my goals. Late last year, I used Personal Capital 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 / flickr

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