How to Save for Retirement Without a 401(k)


Millions of people use 401(k) accounts to save for retirement each year.

These tax-advantaged savings accounts invest your money in long-term mutual funds, stocks, bonds and other securities to grow your nest egg over time.

But there’s a catch: You can only open a 401(k) at work — and not all employers offer them.

In 2020, about 33% of private industry workers didn’t have access to any employer-sponsored retirement plan, according to data from the Bureau of Labor Statistics.

Part-time workers and those who earn the lowest wages are even less likely to work a job with access to a retirement plan.

The truth is, you don’t need an employer to save for retirement. (Although 401(k)s are still great to have, especially if you get an employer match.)

You can take control of your future and save for retirement on your own. And we promise — it’s not as difficult or scary as it sounds.

4 Ways to Save for Retirement Without a 401(k)

1. Individual Retirement Account

Anyone who earns income can open an individual retirement account, or IRA.

Unlike a 401(k), these retirement accounts aren’t tied to your employment. They give you more hands-on control and usually offer more investment options than 401(k)s.

Opening an IRA is easier than ever before, thanks to low-cost robo-advisors and convenient micro-investing apps. We’ll dive into those shortly.

But first, let’s discuss the two types of IRAs: Traditional and Roth. Both offer a sweet tax break but in different ways.

Generally, contributing to a Roth IRA makes sense if you plan to be in a higher tax bracket when you retire, while a traditional IRA can be a better choice if you expect to be in a lower tax bracket when you retire.

Another way to think about it: A traditional IRA can help you save money on your yearly tax bill while a Roth IRA helps you save money on taxes in retirement.

Pro Tip

You can always open and contribute to a traditional and a Roth IRA at the same time. This can help you take advantage of tax savings in different ways. 

Traditional IRA

A traditional IRA lets you worry about taxes later. You put money in your account today and enjoy tax-free growth until you make a withdrawal.

You’ll pay income taxes when you pull money out. How much you owe is based on your tax bracket for the year in which you make the withdrawal.

If you withdraw money before the age of 59-½ the Internal Revenue Service will slap on a 10% penalty (unless you qualify for an exception). Money in your account is earmarked for retirement, so the government doesn’t take kindly to early withdrawals.

Traditional IRA Facts

  • In 2022, you can contribute up to $6,000 a year, or $7,000 if you’re 50 or older.
  • You have to take required minimum distributions (mandatory withdrawals) from your account starting at age 72.
  • Withdrawals are taxed as ordinary income.
  • Early withdrawals before age 59-½ come with a 10% tax penalty.
  • Contributions are generally tax deductible.

That last item is key. When tax time rolls around, any money you added to your account throughout the year reduces your taxable income, which can lower your tax bill or even boost your refund.

However, not everyone can claim this deduction.

  • If your employer offers a retirement account (even if you don’t participate in it: Your adjusted gross income must be less than $66,000 for single filers (or $105,000 for married couples filing jointly) in the 2021 tax year to claim a tax deduction on your traditional IRA contributions.
  • If your employer doesn’t offer a retirement account: You can claim a tax deduction on your contributions regardless of your income.

Roth IRA

Roth IRAs come with a tax bite today but allow you to make withdrawals tax-free down the road.

You fund your account with after-tax money. It grows tax-free and you won’t owe any income tax when you make withdrawals.

However, you won’t get a break at tax time: Contributions to a Roth IRA aren’t deductible.

Roth IRA Facts

  • You can contribute up to $6,000 a year, or $7,000 if you’re 50 or older.
  • You can withdraw contributions anytime, tax- and penalty-free.
  • Money grows tax-deferred.
  • Contributions aren’t tax deductible.
  • No required minimum distributions.

High-income earners can’t contribute to a Roth IRA. In 2022, single filers can open a Roth account if their modified adjusted gross income falls below $144,000, or $214,000 for married couples filing jointly.

A great perk of Roth retirement plans is you can withdraw contributions anytime, tax- and penalty-free. Any of your own original money that you put in, you can take out without owing income taxes.

However, you can only pull the earnings (new money generated by your investments) out of a Roth IRA after age 59-½ and after you’ve owned the account for at least five years.

Otherwise, withdrawing investment earnings can trigger taxes and a 10% early withdrawal penalty.

How Do You Open an IRA?

You can open an IRA online without ever speaking with a human. Isn’t technology great?

Robo-advisors and micro-investing apps make it super easy to get started. You can also open an IRA at most financial institutions and brokerage companies, like Charles Scwab, Fidelity or TD Ameritrade.


IRAs give you way more investment choices than 401(k)s. That’s great if you have investing experience, not so great if you’re just starting out.

But robo-advisors can diversify your IRA portfolio for you, with exchange-traded funds (ETFs) and index funds based on your age, risk tolerance and goals. Most offer useful retirement planning and personal finance tools to visualize and easily manage your investments.

Many robos charge an affordable 0.25% annual account fee with low or no account minimums.

With most investment platforms, you’ll get your choice between a traditional or Roth IRA — or both. Some offer a SEP IRA for self-employed workers, too.

Interested in learning more? Here’s our roundup of the best robo-advisors on the market. 

Micro-Investing Apps

Micro-investing apps like Stash and Acorns make it easy to set up small, recurring contributions to an IRA. Plus, you can start investing with as little as $5.

Like robo-advisors, they’re easy to use, convenient and automated.

However, you might end up paying higher fees over time due to an app’s monthly subscription model. Stash and Acorns, for example, charge $3 to access a Roth or traditional IRA.

Paying $36 a year for a retirement account is steep compared to discount brokers and robo-advisors, especially for users with small account balances.

We’ve reviewed and compared the Linkbest micro-investing apps. Check out our top 5 picks for 2022. 

2. Health Savings Accounts

Using a health savings account (HSA) to save for retirement might seem like a strange idea.

But HSAs aren’t just a way to pay for expenses your high-deductible health insurance doesn’t won’t cover. They offer great tax advantages, making them a smart way to save for the future, too.

Think of it like a 401(k) for your health.

HSAs are said to hold a triple tax benefit because:

  1. Contributions are tax-deductible.
  2. Money within the account grows tax-free.
  3. Distributions are always tax-free when used for qualified medical expenses.

An HSA lets you save on taxes when you contribute. Funds in your account roll over year after year, and you’ll get a tax break for any contributions you make.

You’ll never pay taxes or penalties if you withdraw money from your HSA to pay for qualified health care costs. And when you turn 65, you can use money in your HSA however you want.

Best of all: You can invest money inside your account, just like you would a 401(k) or IRA. This lets your money grow over time, instead of sitting idle like it would in a traditional savings account.

It’s important to keep in mind that some HSA providers offer more — and better — investment options than others.

Some impose minimum balance requirements, transaction fees or investment fees. Nearly all providers charge annual account fees.

Technically, you can open an HSA even if your employer doesn’t offer one. But you can’t make contributions to the account unless you’re covered by a high-deductible health plan.

You can’t add money if you’re enrolled in Medicare or Medicaid either. (However, you can take HSA money out of your account in retirement to pay for things Medicare doesn’t cover, like eyeglasses or hearing aids.)

With eligible high-deductible health plans, you can contribute up to $3,650 a year to an HSA in 2022, or up to $7,300 for families.

3. Traditional Brokerage Accounts

Traditional brokerage accounts give you the benefit of investing for your retirement goals, but lack the special tax breaks IRAs, 401(k) and similar plans offer.

Traditional brokerage accounts are also called taxable investment accounts. You generally owe taxes when you sell securities for a profit, even if you don’t withdraw the money from your account. You’ll also pay tax on any dividend income.

Realized gains are taxed at your normal income tax rate or a lower long-term capital gains tax rate, depending on how long you’ve owned the security.

But that’s not always a bad thing. Using a taxable investment account can actually make sense in some situations.

First, you can make withdrawals from a taxable account at any time, regardless of age. You won’t get pinged by a 10% penalty from the IRS. (Although you may face stiff capital gains tax on earnings.)

This can make a taxable investment account beneficial if you’re saving for other mid- to long-term goals, like buying a house.

Another benefit is you can add as much money as you want: There’s no contribution limits. So taxable accounts can be attractive if you’re already maxing out your IRA or HSA.

As a quick reminder: Traditional brokerage accounts let you buy and sell investments like stocks, bonds, ETFs and mutual funds. You can open an account at financial institutions, online brokers, robo-advisors and investment apps like Robinhood and E*TRADE.

4. Retirement Accounts for Self-Employed People

Small business owners and self-employed people get a few other retirement savings options.


Most major brokerage firms offer Simplified Employee Pension IRAs (SEP IRAs) and they’re easy to set up.

A formal written agreement is required, but the brokerage usually takes care of that for you.

Any business with one or more employees can open a SEP IRA, including independent contractors, self-employed people, sole proprietorships, LLPs, C corporations and S corporations.

That makes these accounts ideal for freelancers, solo entrepreneurs and gig workers.

A SEP IRA offers much higher contribution limits than a traditional or Roth IRA.

In 2022, you can contribute up to 25% of adjusted net earnings or $61,000 — whichever is less.

Because you can add employees to a SEP IRA, these accounts are also attractive for solo business owners who plan to add workers to their payroll in the future.

Solo 401(k)

If you’re self-employed or own a business with no employees, you can open a self-employed 401(k), also known as a solo 401(k).

You get two opportunities to save — as an employee, and again as the employer.

As the employee, you can make tax-deductible or Roth retirement contributions up to 100% of your compensation, with a maximum of $20,500 in 2022 ($27,000 if you’re 50 or older).

On top of that, as the employer you can put in up to 25% of your earned income. However, total contributions (not including additional contributions for those 50 and over) can’t exceed $61,000 in 2022.

You’re eligible to open a solo 401(k) if you generate profit from a sole proprietorship, LLC or any other business organization so long as you don’t have any employees besides you and your spouse.

Unique Features of Self-Employed 401(k)s

  • People 50 and older can make annual catch-up contributions.
  • You can make Roth contributions.
  • You can’t add employees to the plan (besides your spouse).
  • Opening an account can be a little trickier and more time consuming than opening a SEP IRA.
  • Might offer higher annual contribution limits and bigger tax deductions than a SEP IRA.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder. 


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