No 401(k) at your new job? Here are your options


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Not all workplaces offer a 401(k) plan, so don’t worry if you don’t have one.

Key points

  • A 401(k) can make saving for retirement easier.
  • If your job doesn’t offer one, there are other retirement accounts you can open instead.

Many people are quitting their jobs these days and jumping on better opportunities. You yourself may have recently landed a new job, one that offers higher pay and a stronger benefits package.

But what if your new job doesn’t offer a 401(k) plan to help you save for retirement? While it’s common for larger companies to offer a 401(k), for some small businesses these plans can be expensive and cumbersome to administer. You may need to build retirement savings on your own.

If this is the situation you find yourself in, don’t worry. Fortunately, there are other options available that will help you build a retirement nest egg. Here are three to consider.

1. Open a Traditional IRA

With a traditional IRA, you can get immediate tax relief on your contributions to your retirement plan, depending on your earnings. Your money will then grow tax-deferred until you make withdrawals from your account. This means that rather than being hit with a tax bill year after year as your account increases in value, you only pay taxes once you start withdrawing from your IRA.

Traditional IRA withdrawals are taxable upon retirement, and there are penalties for accessing that money before age 59½. However, there are some exceptions, for example if you are using some of your money to buy a first home.

This year, you can contribute up to $6,000 to a traditional IRA if you’re under age 50. If you are 50 or older, this limit increases to $7,000.

2. Open a Roth IRA

With a Roth IRA, you don’t get tax relief on your contributions. But any investment gains in your account are yours to enjoy tax-free, and withdrawals are also tax-free.

Annual contribution limits for Roth IRAs are the same as for traditional IRAs. And like traditional IRAs, penalties could kick in if you access your money before age 59½ and don’t qualify for an exception.

But one difference is that since Roth IRA funds aren’t tax-exempt, you can technically withdraw your major contributions before age 59½ and avoid penalties. This means that if you put $40,000 into a Roth IRA and your balance grows to $50,000 from your investments, you can avoid early withdrawal penalties as long as you don’t touch the $10,000 earnings portion of your account.

Now, you should also be aware that there are income limits associated with Roth IRAs that do not apply to traditional IRAs. This year, you are prohibited from funding a Roth IRA if you are single and earn more than $144,000, or if you are married and file a joint tax return and earn more than $214,000. But if you want to have a Roth IRA, you can get around this problem by funding a traditional IRA and then converting it to a Roth.

3. Invest in a traditional brokerage account

When you put money into a traditional brokerage account, you don’t get any tax relief. But you are also not subject to any restrictions. You can invest as much as you want and you can cash out your investments at any age without having to worry about penalties.

That’s not a good thing, because if your goal is to save for retirement, you don’t necessarily have want to the option to cash out your account sooner. On the other hand, sometimes the need for money can arise without warning, so it’s nice to have the option to withdraw funds that belong to you without being penalized for it.

While a 401(k) can make saving for retirement easier, not all jobs offer one. If this is your situation, the good news is that you have plenty of other choices for building up a solid nest egg.

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