Saving money for retirement can turn out to be quite a financial challenge, especially if you don’t have access to a traditional retirement savings plan.
So, what are some alternative ways to save for retirement without a 401(k)?
Smaller financial goals, like building an emergency fund, are definitely less scary than saving for retirement.
First of all, you need to figure out how much money you need to save. If you plan on enjoying your golden years, you probably need to save a lot!
Second, you have to start saving early, as soon as you land a good job! But since few think about retirement in their 20s, the race to build a retirement nest egg usually starts (much) later.
This isn’t necessarily a problem, once you decide to make retirement savings a priority, you can start contributing to your own traditional 401(k) or a Roth 401(k), or even both.
However, there’s a possibility that you don’t have access to a traditional retirement savings fund. Not all employers offer retirement savings solution to their employees. So… then what?
While having a 401(k) plan to regularly contribute to sounds comfortable, you can still save money by using alternative ways to save for retirement without one.
Alternative ways to save for retirement without a 401(k)
Traditional and Roth IRAs
Unlike the 401(k) plans, IRA plans can be set up by individuals.
Individual Retirement Arrangements are great alternatives to save money for retirement.
Although limited (you can only save $5,500 each year, until you’re 49, and $6,500 if you’re 49 or older), they’re a great way to save tax-sheltered money for your golden years.
Of course, you’d still have to make sure you pick the right one.
With a Traditional IRA, you don’t pay taxes when depositing money, but when withdrawing.
The opposite goes for Roth IRAs: you pay taxes when making a deposit, but take out the money tax free when you retire.
Related article: How does a traditional 401(k) compare to a Roth 401(k)?
Investments are also a great idea to build your retirement nest egg.
By opening up a brokerage account, you have the possibility to diversify your investments.
By investing in stocks, ETFs and mutual funds, you could potentially reach your retirement goals even faster than you planned.
Or, you could go the more safer route and only invest long term, in bonds and certificates of deposit.
Related article: Beginners guide to investing in stocks: 10 basic principles
Annuities are long term contracts offered by insurance companies that are actually designed for retirement.
The way they work is, you invest in them either long term or by making a lump sum pension contribution, in order to have funds available when you retire.
The money grows tax-deffered, but you do have to pay taxes when withdrawing.
Of course, like with any other investment plans, risks are involved.
Among others, there’s the risk of choosing the wrong insurance company or the wrong agent who may not have your best interest at heart.
Related article: Is it smart to invest in life insurance?
Investing your money in something other than a retirement plan can turn out to be a profitable idea.
Investing in real estate does imply getting into big debt. And mortgages aren’t cheap.
However, by investing while you’re still young and able to pay, you can secure a personal property for yourself to live in when you retire and additionally, you could rent it out either before retiring, or even during, to secure additional funds for your golden years.
Businesses are also a good investment.
Invest your time and money while you’re young and still able to work, and secure your nest egg by setting aside your profit.
Related article: Top 3 ownership investment strategies for young adults
Even without a 401(k) plan, finding alternative ways to save money for retirement isn’t a problem.
As long as you decide on a saving strategy that works for you, and stick to it, retirement will indeed live up to the ‘golden years’ status!
What other ways to save for retirement can you recommend?
What works for you?