Not every workplace offers a 401(k) plan, so don’t sweat it if you don’t have one.
- A 401(k) can make saving for retirement easy.
- If your job doesn’t offer one, there are other retirement accounts you can open instead.
Many people are leaving their jobs these days and jumping on better opportunities. You may have gotten a new job recently yourself — one that offers higher pay and a more robust set of employer benefits.
But what if your new job doesn’t offer a 401(k) plan for you to save for retirement? While it’s common for large companies to offer a 401(k), for some smaller companies, these plans can be costly and cumbersome to administer. You may have to figure out retirement savings on your own.
If that’s the situation you’re in, don’t sweat it. Thankfully, there are other options available that will help you build a retirement nest egg. Here are three to consider.
1. Open a traditional IRA
With a traditional IRA, you can get an immediate tax break on your contributions to your retirement plan, depending on your income. Your money then gets to grow on a tax-deferred basis until you take withdrawals from your account. That means that rather than be hit with a tax bill year after year when your account gains value, you only pay taxes once you begin to withdraw from your IRA.
Traditional IRA withdrawals are taxable in retirement, and there are penalties for accessing that money before age 59 1/2. However, there are a few exceptions, such as if you’re using some of your money to purchase a first-time home.
This year, you can contribute up to $6,000 to a traditional IRA if you’re under age 50. If you’re 50 or older, that limit rises to $7,000.
2. Open a Roth IRA
With a Roth IRA, you don’t get a tax break on your contributions. But any investment gains in your account are yours to enjoy tax free, and withdrawals are tax free as well.
The annual contribution limits for Roth IRAs are the same as traditional IRAs. And like traditional IRAs, penalties could come into play if you access your money before age 59 1/2 and don’t qualify for an exception.
But one difference is that since Roth IRA funds don’t go in tax free, you can technically withdraw your principal contributions before …….