(NewsNation) — Many employers offer retirement plans, such as 401(k)s, to full-time employees. However, many Americans don’t have access to a 401(k).
With options like Roth IRAs, solo 401(k)s, and SEP-IRAs, those without access can still work toward their retirement goals. Additionally, if your employer doesn’t provide a 401(k), you might still have access to a pension, profit-sharing or employee stock purchase plan.
Here’s how to save for retirement without a 401(k):
IRA or Roth IRA plan
An individual retirement account (IRA) is accessible to nearly everyone, even if you’re unemployed. When opening an IRA account, decide between a traditional or Roth account.
Traditional IRAs allow pre-tax contributions, so you don’t owe on the money you save, but you pay taxes on withdrawals in retirement.
With Roth IRAs, contributions are post-tax, but withdrawals are tax-free in retirement.
The IRS limits how much you can set aside in an IRA annually. The limit was up to $7,000 in 2024.
SEP-IRA plan
A simplified employee pension, commonly known as a SEP-IRA, is a retirement plan for self-employed workers, freelancers and businesses including sole proprietors, partnerships and C-corporations, and S-corporations.
Contributions, which may be tax-deductible, are made by the employer, not employees. However, employees can add traditional IRA contributions if allowed by the plan.
In 2024, contributions were capped at 25% or $69,000, whichever is lower, with all eligible employees receiving the same percentage.
This plan is ideal for solo entrepreneurs and small businesses willing to contribute equally to employees and owners, according to Fidelity.
SIMPLE IRA plan
A SIMPLE IRA is ideal for self-employed people or small businesses with 100 or fewer employees.
You can contribute up to 100% of your compensation, up to $16,000. This limit is 10% higher for eligible plans. However, the plan allows people 50 and older to save an additional $3,500.
Additionally, employers must put in a 3% matching contribution or a 2% nonelective contribution. However, the latter is not contingent on the employee contribution, the way a matching contribution to a 401(k) typically is, Fidelity reports.
Employers may also make a uniform nonelective contribution to all employees of the lesser of 10% of compensation or $5,000.
Contributions can be required even if the business has no profits. It’s a cost-effective option, allowing salary deferrals and contributions until the tax filing deadline. Plans must be set by Oct. 1.
Self-employed 401(k) plan
A self-employed 401(k), or solo 401(k), is an option for maximizing retirement if you’re self-employed or own a business or partnership with no employees. A spouse who works in the business can also participate.
You can contribute as an employee and employer:
- Employee contributions: You can make a tax-deductible or Roth contribution up to $23,000 in 2024. For 2024, you could save an extra $7,500 for a total of $30,500 if you’re over 50.
- Employer contributions: You can contribute up to 25% of eligible earnings. This contribution is always made before tax.
The contribution limit for employees and employers is $69,000 in 2024, plus an additional $7,500 for people aged 50 and older. Once the account exceeds $250,000, you must file IRS form 5500.
Health savings account
A Health Savings Account (HSA), available to people with a high deductible health plan, offers tax advantages for medical expenses and doubles as a retirement tool.
In these accounts, funds grow tax-free and don’t expire. However, before age 65, HSA funds can only be used toward qualified medical expenses without a penalty. After age 65, the funds can be used for any purpose and be taxed at your regular rate without penalty.
Experts advise confirming your eligibility before opening an HSA.
Brokerage account
Some experts recommend opening an investment account to use as a retirement account and scheduling automatic contributions on a schedule that suits you.
Unlike IRAs, it allows early access to your funds without penalties in case of emergencies.