What to Do If Your Job Doesn’t Have Retirement Benefits

Shutterstock

Maintaining a quality of life when you retire is vital. But you can’t work forever, and Social Security may not be enough. Many companies provide retirement plans to help with future goals. Pension plans are long gone, but most companies have a 401(k) plan available.

But what if your company doesn’t have anything? You could change companies in the hopes of better benefits or chart your retirement course. What are your options?

Individuals Without Retirement Benefits

More than a third of the private sector doesn’t have a work-sponsored retirement plan available. This number jumps for millennials, with more than two-thirds without a plan. About half of Gex Xers participated in a plan, while 56 percent of baby boomers took part in one.

The workforce has changed, and now there are more freelancers or self-employed people who don’t have retirement plans. Many people, like millennials, work part-time and aren’t eligible. Finally, some companies just don’t offer this benefit.

Alternatives to Work-Sponsored Retirement Benefits

Even if your employer doesn’t offer any retirement benefits, you can still save. There are other options. For one, you could encourage your company to start a 401(k). The other option is to find another job that offers benefits. But if these options aren’t practical. Here are a couple alternatives.

Roth Individual Retirement Account

A Roth individual retirement account (IRA) is a sound place to start when saving for retirement. 

A Roth IRA is different from a traditional one. With a traditional IRA money is saved pre-taxed. You pay the taxes when you withdraw it at a later date.

But you pay the taxes before saving it in a Roth IRA. Your money is then free to grow tax-free, and you won’t have taxes to pay when you withdraw at retirement. 

The Roth IRA is flexible because you can withdraw contributions you made into it at any time. You don’t have to wait until retirement. But if you want to withdraw the earnings from your money, you must be at least 59½, and your account must be at least five years old.

You can only put away a certain amount each year. For 2024, the contribution limit is $7,000 for those under 50 and $8,000 for those 50 and older.

Roth IRAs don’t have the required minimum distribution (RMD), which is a plus when you want to retire and have your money grow longer.

You’re not limited to an employer’s plan, so you can comparison shop different companies and choose from various investment portfolios. 

The Roth IRA is yours and stays with you even if you switch jobs. There’s no scrambling to do something with your money. It’s there and safe.

Young people are great candidates for Roth IRAs because they tend to be in a lower tax bracket. They’re paying Uncle Sam less to save their money.

The best way to set up and fund your Roth IRA is to mimic the auto-saving feature of 401(k) plans. Set up a recurring payment through your checking or savings account and forget about it.

But there are income limits with a Roth IRA. In 2024, a single filer with a modified adjusted gross income of more than $161,000 is not eligible to contribute into a Roth IRA.

Taxable Investment Account

Sometimes called a brokerage account, a taxable investment account is the next step if you’ve maxed out your Roth IRA.

You won’t have any tax advantages, but you can still use it to fund your retirement. These accounts also don’t have any contribution limits. You can invest as much as you need to finance your retirement.

Solo 401(k)

This is for freelancers, sole proprietors, and independent contractors. You can still have a retirement plan despite not having an employer plan.

The solo 401(k) plan is also known as the independent 401(k) plan. In order to participate, you must generate income from your own business. You must run the business on your own or with a spouse. You'll also need an employer identification number (EIN) to enroll in a plan.

You can contribute to the plan as an employee and as an employer.

Do some research to find the best solo 401(k) for you. Before proceeding, it’s best to talk to a financial advisor.

Create Your Retirement Plan

Many young people work in service industries where retirement plans aren’t offered. These individuals are usually the last to think about the future.

But by using a Roth IRA and contributing at least $50 a month, they could be on their way to saving for retirement.

Independent workers don’t have to go without a funded retirement plan. If you meet the qualifications, you can take advantage of a Roth IRA.

There’s always creating a solo 401(k) to fund your retirement. 

Regardless, there are options, it just takes some research and discipline.