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How to Save for Retirement Without a 401k

Updated: Dec 19, 2018

How to Save for Retirement Without a 401k


If you’re frustrated by all the retirement planning advice (including our own) that puts a 401(k) in the central role, you’re not alone. Over one-third of all workers don’t have access to an employer-sponsored retirement savings plan.(1) And though some employees have a 401(k), not all receive an employer match, which is a certain contribution percentage sometimes offered by employers.

Wondering what’s the best option for you? Here’s how to save for retirement when you don’t have a 401(k).

Saving for Retirement Without a 401k

Open a Roth IRA.

Though you may not be able to save for retirement with a 401(k) or 401(k) match, you can take full advantage of a Roth IRA. Currently, you can contribute $5,500 a year to your Roth IRA—or $6,500 if you’re 50 or older.(2) You can choose from thousands of mutual funds, making it easy to diversify your investments evenly between the four categories: growth, growth and income, aggressive growth and international.

Though you may not be able to save for retirement with a 401(k) or 401(k) match, you can take full advantage of a Roth IRA. —Chris Hogan

Best of all, since you pay taxes on the money when you initially contribute, you will be able to draw your savings in retirement tax-free. That means if you contribute the maximum amount each year, you could potentially have a nest egg worth almost $1.5 million after 30 years. And you won’t have to pay a penny in income taxes to use it in retirement.

What are the Roth IRA requirements?

To be eligible to fully contribute to a Roth IRA, you must:

Have an earned incomeHave a modified adjusted gross income—total adjusted gross income (which is the total gross income minus deductions) plus any tax-exempt interest income—that’s less than $189,000 for married couples filing jointly or $120,000 for single people(3)

Now pay attention, because this is important. Married couples can have two Roth IRAs even if one spouse does not have an earned income. You can contribute the maximum to both accounts, a total of $11,000 a year. For many people, fully funding two Roth IRAs will be enough to reach the goal of investing 15% of their income for retirement.

What about a traditional IRA?

If your income is too high to contribute to a Roth IRA, you can go with a traditional IRA. Like a Roth IRA, you can contribute up to $5,500 annually, $6,500 annually if you’re 50 or older, and you and your spouse can both have an account.(4)

If your income is too high to contribute to a Roth IRA, you can go with a traditional IRA. —Chris Hogan

That’s where the similarities end. Unlike a Roth IRA, you don’t have to make less than a certain amount to be eligible to contribute to a traditional IRA because they don’t have any annual income limits. But not only are you required to begin withdrawing after you turn 70 1/2, you also can’t contribute any more money. And though contributions to a traditional IRA are tax deductible, you’ll have to pay taxes on the money you withdraw from it in retirement.

Still with me? Now, let’s look at some other options you can explore if you’re self-employed.

Saving for Retirement if You’re Self-Employed

If you are self-employed and don't have any employees, a one-participant 401(k)may be right up your alley. Contributions are tax deductible and you can contribute up to $18,500 annually. Then, on top of that, you can put in additional money of up to 25% of your income as long as what you contribute is less than $55,000 per year.(5)

SEP-IRAs are primarily used by small-business owners who want to contribute to their employees’ retirements, but freelancers and the self-employed can also use this option. You can contribute to your own retirement this way, but you can’t exceed the lesser of either 25% of your income or $55,000.(6)

What if I run a small business with employees?

Once you have employees, the rules of the road change a bit. A great choice is a SIMPLE IRA, which requires you to offer up to a 3% match for participating employees annually—and contributions are tax deductible. SIMPLE IRAs come with an individual annual limit of $12,500 (if you’re under 50).(7)

Retirement OptionSituation

Yearly Max (under 50 years old)

Roth IRAAny Earned Income$5,500Traditional IRAAny Earned Income$5,500One-Participant 401(k)Self-Employed$18,500 (and anything up to 25% of income)Simple IRASmall Business$12,500SEP IRAFreelancer/Self-Employed25% of earned income

What other options do I have?

If you work for a nonprofit or other tax-exempt organization, a 403(b) plan is another great pretax investment option that works a lot like a 401(k). You can use this plan to invest in mutual funds, but steer clear of annuities that are also usually offered in 403(b) plans.

Federal employees can save for retirement through the Thrift Savings Plan (TSP). TSPs usually come with matching contributions and allow you to make after-tax contributions with the added plus of tax-free withdrawals when you retire. You can also choose how to split your TSP contribution between several unique options.

Use a taxable investment account.

If you don’t have any of the above options or if you are able to save more once you max out a tax-deferred option, contributing to a taxable investment account is a great way to hit that 15% investment goal.

Be sure to put your higher taxed investments, like mutual funds, in your tax-deferred accounts—if you have them—and your lower taxed investments in your taxed account. You can ask one of our tax Endorsed Local Providers (ELPs) to help you decide which investment to have in which account.

Use direct deposit.

One of the best parts of a 401(k) plan is that your money is withheld from your paycheck automatically, saving you from accidentally spending money you should be saving. You don’t even have to think about investing for retirement. It just happens!

You can recreate this powerful effect by setting up a direct deposit from your paycheck to your chosen investment option. Just because your money is being deposited automatically, however, doesn’t give you permission to go on autopilot with your overall retirement plan. Be sure you’re communicating regularly with your financial advisor to stay dialed in to your retirement future.

Remember, it’s up to you!

Get started today!

An investing advisor will help you choose the mutual funds you’ll invest in through any options you choose. You can even set up automatic contributions to make retirement saving as convenient as a 401(k).

An expert advisor can also show you other options if your income exceeds the limits of your first choice. Or, if you’ve maxed out your tax deductible investible income but still have money to invest, they can help with that too. You can find an experienced pro with our nationwide investing network, SmartVestor.

Find your pro today!

About Chris Hogan

Chris Hogan is a #1 national best-selling author, dynamic speaker and financial expert. For more than a decade, Hogan has served at Ramsey Solutions, spreading a message of hope to audiences across the country as a financial coach and Ramsey Personality. Hogan challenges and equips people to take control of their money and reach their financial goals through national TV appearances, The Chris Hogan Show, and live events across the nation. His second book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth—And How You Can Too, is based on the largest study of millionaires ever conducted. You can follow Chris Hogan on Twitter and Instagram at @ChrisHogan360 and online at or


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