Your Employer Doesn't Offer a 401(k) -- Now What?

Your Employer Doesn’t Offer a 401(k) — Now What?

( – If your employer doesn’t offer a 401(k) retirement plan, finding the best ways to save for your golden years might be challenging. Most companies don’t provide workers the option to participate in a plan, so preparing for the golden years typically falls to individuals. And no matter when you start, saving is still possible. Here are three effective ways to save for the future.

  1. Traditional IRA: As long as you earn income, you can open this type of investment account with a qualified institution like T. Rowe Price or Vanguard. You will contribute your pre-tax dollars into the IRA and choose investments you believe will give the best returns. The downside is that the government limits contributions to $6,000 or $7,000 per year, depending on the contributor’s age. While you can claim the deposits on your taxes at the year’s end, you’ll pay those taxes and any capital gains based on the growth of the assets once you start withdrawing the money.
  2. Roth IRA: This investment works like a traditional IRA, except you don’t get to write off the contribution on your return. Instead, you contribute funds you’ve already paid taxes on, and the investment inside grows tax-free. You also don’t pay Uncle Sam on the back end when you withdraw your retirement funds.
  1. Solo 401(k): If you’re self-employed, you can open this type of retirement account. Available in both traditional or Roth forms, owners of this investment can contribute as both employer and employee, resulting in higher allowed deposit amounts. Depending on your choices, taxes will work the same as the options above.

Each path may have specific advantages, but the important aspects are to have a plan, contribute what you can, and prepare for a future without work.

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