Best Retirement Plans if You Don't Have a 401(k)


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One of the most common ways to save for retirement is to consistently invest a portion of your income into a 401(k) retirement account.

401(k) accounts have numerous advantages, including tax benefits, the ability to borrow against it in the case of an emergency and the fact that most employers will match a certain percentage of your contributions.

But, 401(k) retirement plans are not for everyone.

For example, people who are self-employed may not have access to a 401(k) account. But there are plenty of other options for retirement savings.

Here we will take a look at some of those options.

Option #1: IRA or Roth IRA

An IRA retirement savings account is similar to a 401(k), but it is not an employer sponsored account.

As such, when you contribute to your IRA, there will be no matching funds deposited. IRA accounts are beneficial for retirement savings because they allow you to contribute up to $5,500 per year (up to $6,500 per year if you are over 60), and they offer generous tax benefits.

One decision you will need to make when choosing between a Traditional IRA and a Roth IRA is when you wish to pay taxes on the money from the account.

With a Traditional IRA, you will pay taxes on the funds when you withdraw in your retirement years– but contributions are tax deductible in the year you make the contributions.

With a Roth IRA, contributions are not tax deductible, but when the funds are withdrawn they are usually tax-free.

Option #2: Invest in the Markets

Many people would rather invest their retirement money directly in the stocks or bonds markets than using a retirement vehicle.

There are several reasons for doing this, including the quantity of retirement savings you need to invest and tax considerations. Fortunately, there are a number of ways to invest your retirement funds without using a 401(k) or IRA.

One of the most straightforward ways is to invest in a tax-managed mutual fund. These funds use different financial techniques to keep taxable distributions in check.

Alternatively, you could invest in a stock market average, such as the S&P or the Dow Jones Industrial Average.

Option #3: Real Estate

As a result of the housing bust in 2008-2010, there is a wide variety of opportunities to invest in real estate at prices which are below market value.

Though the tide of foreclosure is coming to an end, those looking to invest in real estate for retirement purposes can still take their pick of condominiums, single family homes and multi-family homes in which to invest.

One investment strategy worth investigating is to purchase a multi-family home and live in one of the units while renting the others. Properly implemented, this strategy can result in your being able to live virtually rent-free and you may even be fortunate enough to make a monthly profit from tenants.

As the property would serve as part of your retirement portfolio, your retirement “savings” would grow as the value of the property grows. This kind of strategy is recommended for those who have at least 15 to 20 years before their anticipated retirement timeframe.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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