Can You Save Enough for Retirement Without a 401(k)?

July 18, 2021

A 401(k) is a popular first choice for retirement savings, because it offers high contribution limits. Many employers chip in as well, which makes saving enough a little less daunting. But not everyone has access to one of these accounts.

Saving for retirement without one is more challenging, but it's doable if you're focused and make smart use of the accounts available to you. Here are a few options to consider if you're trying to save for retirement without a 401(k).

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A self-employed retirement account, if eligible

A self-employed retirement account is your best alternative to a 401(k) if you're eligible for one. These are designed for individuals who own their own businesses. They often offer higher contribution limits than 401(k)s, because you can make contributions as both the employer and employee.

They get a little more complicated if you have employees, because some accounts require employers to match a portion of their employees' contributions. That could prove too costly for you.

There are several types of self-employed retirement accounts, each with their own pros and cons. Some of the most popular are:

Review each of them to see which is the best fit for you before you open one.


Anyone earning income throughout the year can open and contribute to an IRA. These accounts have several advantages over 401(k)s, including a greater selection of investments. You can also choose between paying taxes now in exchange for tax-free retirement distributions (Roth IRA) or deferring taxes until retirement (traditional IRA).

The biggest drawback to IRAs is their low contribution limit. You can only contribute up to $6,000 to an IRA in 2021, or $7,000 if you're 50 or older. Those numbers are much smaller than the $19,500 limit for a 401(k), or $26,000 if you're 50 or older. Contribution limits can change periodically, but they'll always be far below what the 401(k) offers. If you plan to save more than $6,000 to $7,000 for retirement this year, you should pair an IRA with one of the other accounts listed here.

A health savings account

Health savings accounts (HSAs) weren't designed to be retirement accounts, but they are nonetheless a great place to stash some of your savings. Money you contribute to an HSA reduces your taxable income for the year, just like your contributions to a traditional IRA or 401(k), and if you use the money for medical expenses, you won't pay taxes on it at all.

The real benefit for those using their HSA for retirement savings comes at 65. At this point, you can use money for non-medical expenses without paying the 20% penalty that you would face otherwise. You'll still owe taxes on non-medical withdrawals, but you won't have to worry about required minimum distributions (RMDs) when you turn 72 like you do with most retirement accounts, so you can leave your money in the HSA for as long as you'd like.

You must have a high-deductible health insurance plan to open and contribute to an HSA. This is a plan with a deductible of $1,400 or more for an individual and $2,800 or more for a family. If you qualify, you can contribute up to $3,600 as an individual in 2021 or $7,200 if you have a family plan.

A taxable brokerage account

Anyone can contribute to a taxable brokerage account. They're not strictly for retirement, and they don't give you the same tax breaks as the accounts mentioned above, but you can still save some money on taxes if you hold onto your investments long term.

Capital gains from investments you've held for less than one year are taxed at the same rate as income from a job, but if you hold your investments for a year or more, they're subject to long-term capital gains taxes. Here's a detailed guide if you want to learn more about how that all works, but essentially, it means you'll owe the government a smaller percentage of your investment earnings than you would if you had to pay normal income taxes on it. You might not owe any taxes at all on your investment earnings if your income is below a certain threshold for your tax filing status.

Another big advantage of taxable brokerage accounts is that there aren't any rules on when you can withdraw the funds, so you won't pay penalties for taking the money out before reaching 59 1/2 years old like you would with a 401(k) or IRA. That said, if you're planning to use your taxable brokerage account primarily for retirement savings, it's best to leave the money in your account as long as possible.

You can use one or a combination of the accounts listed here to save for retirement. Whichever you choose, make sure you understand any rules or contribution limits associated with it and contribute money regularly. Consistency is key to building up a large enough nest egg to see you through retirement.