If you are beginning to save for retirement without a 401k, there is no need to panic. Plenty of alternative ways to save money are available for freelancers or employees with no workplace 401k offering. Here are a few tips to help you save for retirement without a coveted 401k.
Saving Tax Refunds
The simplest way to begin saving for retirement at any age is by putting your tax return away once you received it. Do this every single year, if you can afford it. There are several options with how you can save or invest this return each season. IRS Form 8888 will allow taxpayers to deposit the refund directly into two or more separate savings or investment accounts. Be sure to refrain from spending your tax refund and put it away for retirement.
The most popular option for employees without a 401k is opening an IRA. Of course, there are a few different types of IRAs. Either a Roth IRA or a traditional IRA will prove beneficial in the long term. And the best news is this is not an exclusive offering. Any individual who earns an income can open an IRA. This includes individuals who are unemployed, but married to a spouse earning an income. This is a terrific option for freelancers or the self-employed.
If you are self-employed and not earning a ton of money per year, a 401k plan is still an option. This plan is also known as a solo 401k. With this option, you can contribute twice. You can contribute savings as an employee and employer. Self-employed 401ks allow you to contribute up to 100% of your yearly income, as long as the total amount doesn’t exceed $19,500. The contribution differs from the employer side, only allowing individuals to contribute 25% of yearly compensation. After the age of 50, you can make additional contributions to this 401k. Spouses of participants are also eligible for this plan.
Contribute To A CD
A CD or certificate of deposit offers another option for individuals without a 401k. Everyone could use some liquid cash, right? One obvious benefit is that most of the time your money can be withdrawn on demand. So, if you run into any medical emergencies or pressing financial situations, you can pull this money out right away. CDs are insured by the federal government to never lose any value. CDs are as safe an investment as one can make today.
Health Savings Account
Whether you have chosen to open an IRA, CD, save tax refunds or all of the above, you should consider opening a health savings account. A health savings account (HSA) has several benefits, including tax-free withdrawals and tax-free growth potential, among the positives. You can take money out of this account with no penalties associated after the age of 65.