Saving for Retirement Without a 401(k)
If you’re frustrated by all the retirement planning advice (including our own) that casts a 401(k) in a central role, you’re not alone. About half of all workers do not have access to an employer-sponsored retirement savings plan. Then there are those who have a 401(k) but don’t receive an employer match.
Are you doomed to a skimpy retirement if you don’t have a 401(k)? No way! Keep reading to find out how to fill the gap.
Roth IRA Saves the Day
The great part about saving for retirement without a 401(k) or 401(k) match is that you can take full advantage of a Roth IRA. Currently, you can contribute $5,500 a year to your Roth IRA—$6,500 if you’re 50 or older. You can choose from thousands of mutual funds, making it easy to diversify your investments between the four categories Dave recommends: growth, growth and income, aggressive growth and international.
Best of all, you will be able to use 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.
Do You Meet the Requirements?
To be eligible to contribute to a Roth IRA, you must:
—Have an earned income
—Have a modified adjusted gross income that’s less than $178,000 for married couples filing jointly or $112,000 for single people
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.
Get Started Today
Setting up your Roth IRA is simple. An investing advisor will walk you through the paperwork and help you choose the mutual funds you’ll invest in through your Roth. You can even set up automatic contributions to make retirement saving as convenient as a 401(k).
An experienced advisor can also show you other options if your income exceeds the limits of a Roth IRA or if you’ve maxed out your Roth IRA but still have money to invest. You can find a trustworthy investing advisor through Dave’s nationwide network of investing Endorsed Local Providers (ELPs).