How to Save for Retirement if You Don’t Have a 401(k)

Published on December 15, 2017

Most people start saving for retirement when they have access to a plan through an employer, such as a 401(k) or 403(b). It’s a no-brainer to take advantage of that opportunity, especially when your company offers to match a share of contributions.

But what if you don’t have access to those benefits? Perhaps your employer doesn’t offer them, you don’t qualify based on part-time or contract status, or you’re self-employed.

Guess what? That’s no excuse to not save for retirement. Understandably, it can seem daunting to figure out how to open a retirement account on your own. But there are great options out there for you—and it’s not as hard as you think.

Why you should save for retirement even if you don’t have a 401(k)

Planning for retirement is critical, especially as the Social Security system stands on precarious footing and pensions are becoming extinct in many fields. And building your nest egg is likely to be the most ambitious financial goal of your life. That’s why it’s important to start saving as soon as you can. In many cases, it’s a good idea to make sure your retirement savings are on track before saving for your children’s college education, or even aggressively paying down your own student debt. (More on that here.)

A key reason to start early is the power of compounding. Anything you put in now has the opportunity to grow over time (just keep in mind that all investing comes with risk of loss). SoFi’s online retirement calculator can help you figure out where you stand.

Why you should open a retirement account

Maybe you’re already saving for retirement, but you’re keeping the money in a checking or savings account. You’ve got the right idea by putting money away, but assuming you’ve still got a few decades of working ahead, you should move that money to an actual retirement account. If you’re leaving your savings in cash, that money is barely keeping up with inflation—or worse, losing relative value over time. You’re unlikely to reach your retirement goals without investing the funds, which does come with risk but can provide much higher returns over time. Plus, you’re losing out on valuable tax benefits.

If you have a 401(k) from a former employer, keeping it there is a possibility. But sometimes that can stick you with high maintenance fees or limit your investment options. In that case, it might be a smarter option to rollover your 401(k) into an account of your own.

How to open a retirement account

The easiest way to save for retirement on your own is to open an IRA, or Individual Retirement Account. If you’re currently earning income, you’re eligible.

The first step is determining which type of IRA is right for you. The most common are a Traditional IRA and Roth IRA. Each allows you to contribute $5,500 a year as of 2017. The traditional IRA lets you deduct that money from your taxes today (instead, you pay taxes on the funds when you withdraw them). The Roth IRA has you put in money after taxes, but you can take distributions tax-free. Generally, go with a traditional IRA if you tend to owe a lot in taxes today and a Roth IRA if you generally get refunds or owe very little. Also note that to contribute to a Roth IRA, you need to earn less than a certain amount.

If you’re a freelancer, have an independent side hustle, or otherwise work for yourself, you can open a SEP IRA. In most cases, this allows you to contribute more each year. You can contribute up to 25% of your earnings or $55,000 in 2018—whichever is smaller. Like a traditional IRA, a SEP IRA can help you reduce what you owe in taxes today.

Open a retirement account today

SoFi Wealth makes opening an IRA easy. Sign up for a SoFi Wealth account online, in less than five minutes. Our technology can help you pick an appropriate mix based on your age and retirement goals. And if you have any questions or want personalized advice, you can set up a call with a SoFi Wealth advisor—absolutely complimentary.

Set up a complimentary IRA consultation

Open an IRA

SoFi Wealth, LLC does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.

The SoFi Wealth platform is operated and maintained by SoFi Wealth LLC, an SEC Registered Investment Advisor. Brokerage services are provided to clients of SoFi Wealth LLC by SoFi Securities LLC, an affiliated broker-dealer registered with the Securities and Exchange Commission and a member of FINRA / SIPC. Investments are not FDIC Insured, have No Guarantee and May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Clearing and custody of all securities are provided by APEX Clearing Corporation.

SSL Encrypted
Equal Housing Lender