401(k) Tips

If an Employer Doesn't Offer a Retirement Plan, What Might Be Another Way to Save for Retirement?

If your employer doesn’t offer a retirement plan, you still have options to save for retirement. IRAs and annuities provide great opportunities to build a nest egg.

4 min read

An employer-sponsored retirement account is one of the best ways to save for retirement. The 401(k) is one of the most available retirement savings accounts. However, many Americans still don’t have access to an employer-sponsored retirement plan. Only 59% of American workers are provided a retirement plan through their employer. If you’re one of them, don’t worry. There are plenty of opportunities to save for retirement outside of employer-sponsored plans.

If your employer doesn’t offer a retirement plan, individual retirement accounts (IRAs) and Roth IRAs are great alternatives. The contribution limits for each are much less than what is allowed for employer plans but still provide many benefits. Additionally, annuities offer a riskier, non-tax-deferred option.

When left without the guidance of an employer-sponsored retirement plan like a 401(k), it can be challenging to decide the best options to save for retirement. Let’s go over the features of each, where to open these accounts, and what makes them good options if you find yourself without a retirement plan where you work.

What options are there other than an employer-sponsored retirement plan?

Unfortunately, many Americans aren’t taught how to adequately save for retirement. Without knowing what kinds of accounts are available, how much to save, and the rules surrounding them, it can get confusing deciding what’s best for our futures.

Most retirement savers have the benefit of an employer-sponsored retirement plan. Backed by a plan administrator or custodian that provides information about the plan, the available investment options, and further guidance, employer plans are relatively easy to manage. However, without the help, you can find yourself on your own.

Here are a few great alternatives to 401(k)s if your employer doesn’t offer a retirement plan.

Individual Retirement Account (IRA)

Individual retirement accounts are designated retirement accounts that are very similar to 401(k)s. But unlike 401(k)s, IRAs aren’t provided by employers. Instead, IRAs are held by outside investing institutions and brokerages. Some of the more popular institutions that provide IRAs are Vanguard, Fidelity, and Charles Schwab. Opening an IRA account is as easy as opening a checking account. Account-holders then fund their IRAs by transferring money from their bank accounts.

IRAs are similar to 401(k)s in that they are tax-deferred retirement accounts. This means that contributions made to an IRA offset the account holder’s tax obligations during that tax year. Withdrawals are then taxed at the applicable tax rate for the year they were distributed. Additionally, because IRAs are designated retirement accounts, ineligible withdrawals made before 59½ are assessed a 10% penalty tax by the IRS.

One of the negatives to IRAs is that annual contributions are limited to only $6,000 in comparison to 401(k)s $19,500 contribution limit.

However, a benefit to having an IRA at a robust investing institution is the seemingly infinite options to invest in. Most institutions offer a wide array of mutual funds, index funds, target-date funds, individual stocks and bonds, and ETFs. This allows retirement savers to manage and grow their money how they choose.

Roth IRA

Like a traditional IRA, Roth IRAs are held at outside investing institutions. In most places, offer IRAs, you can open a Roth IRA as well. Because of this, investors can choose from the same wide array of investment options that match their goals and risk tolerance. However, Roth IRAs differ from IRAs, mainly when it comes to taxes.

The main feature of Roth IRAs is that contributions are made after taxes are paid. The limits the amount you can contribute slightly because you’ll need to pay Uncle Sam first. However, distributions taken during retirement are done tax-free. This adds a great benefit to retirees looking to maximize the amount of money they keep in their pockets during retirement.

The after-tax contributions made to a Roth IRA can be withdrawn anytime and avoid the IRS’s 10% penalty tax. However, the growth portion of the Roth IRA can’t be withdrawn until 59½ without being charged a 10% penalty tax.

Roth IRAs have the same $6,000 annual contribution limit as IRAs, but this limit doesn’t apply to both simultaneously. If you have both an IRA and a Roth IRA, you can contribute $6,000 to each account for a total of $12,000


Annuities are a more risky option to either IRA accounts. Additionally, they aren’t tax-deferred. This means you pay taxes prior to putting money into an annuity, and you’ll pay taxes when the money is taken out. However, annuities can be a great option to add to a retirement portfolio while you’re young and can handle the risk.

Annuities are contracts issued and distributed by investing institutions where funds are invested with the intention of paying out a fixed income during retirement.

Contributions are limited by amount but by an accumulation phase. Account-holders can contribute funds either in one lump sum or through periodic payments. Once the annuitization stage is reached, the account will then payout for either a fixed period or the account holder’s remaining lifetime.

Examine an employer’s benefits package before accepting a job.

To avoid putting yourself in a position where your employer doesn’t offer a retirement plan, make sure you analyze a company’s benefits package before accepting a job with them.

Unfortunately, many job candidates are more concerned with the offered salary, and rightfully so. However, an employer’s retirement benefits are just as significant. A decent retirement plan with an employer match can add thousands to your annual compensation.

If you’re offered a job at a company that doesn’t offer a retirement plan, use that information in negotiating your annual salary. Knowing you have alternative options like IRAs and Roth IRAs, negotiating a higher salary means you’ll have more income to save into them. This will help make up for the lost employer match you would have received with another employer that provides a 401(k) match.

At the end of the day, if your employer doesn’t offer a retirement plan, you have options. You can still save for retirement and build a sizable nest egg. You could even use it as a negotiating tool with your company to get a raise to compensate.