No 401(k) Match? 2 Even Better Ways to Save for Retirement

When you have a 401(k) match, you should take advantage of it. Matched money is free money and it’s worth contributing to get it.

But not everyone works for a company that provides this retirement savings help.

And if you don’t, there may actually be two better ways to save for retirement than sticking your cash in a 401(k). Here’s what they are.

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1. Health savings accounts

Although it’s not technically a retirement savings account, a health savings account (HSA) is actually one of the best options available to save for your later years.

That’s because HSAs allow you to invest with pre-tax dollars and enjoy tax-deferred growth, just like 401(k)s. But they also allow you to take money out of the account tax-free in retirement, which isn’t an option with a traditional 401(k).

Now, there are some caveats to be aware of. You must be eligible to invest in an HSA before you can contribute, which means you need a qualifying high-deductible health plan. And you can only withdraw money tax-free if you’re using it to pay for qualifying health expenses.

Since many seniors spend six-figure sums on healthcare, that’s likely not to be a major downside of HSAs. And you’re allowed to take money out penalty-free for any purpose after age 65 — you’d simply have to pay taxes at your ordinary rate, just as you would with a 401(k).

If you’re eligible to contribute to an HSA and don’t have a 401(k) match, this likely should be the first account you should max out.

2. Roth IRA

A Roth IRA can also be a great alternative to a 401(k), especially if you don’t have access to an employer match.

A Roth requires you to contribute with after-tax dollars, unlike a traditional 401(k), which has deductible contributions. But Roth IRAs have a few big advantages over a typical workplace 401(k) plan:

You can withdraw money tax-free. As a senior, you won’t have to worry about owing the IRS money on your distributions.
Distributions don’t render Social Security taxable. You could be taxed on up to 85% of Social Security benefits if “countable” income is too high — but distributions from a Roth don’t count toward countable income. You can take out as much as you’d like without Social Security benefits being impacted.
You can take money out on your own schedule. When you have a 401(k), the IRS requires you to begin making required minimum distributions (RMDs) starting at age 72. No RMDs are required with a Roth IRA.
You can withdraw contributions any time. If you take your contributions out of a 401(k), you could face a penalty if you aren’t 59 1/2 years old yet. But since Roth contributions are made with after-tax dollars, you can take out the contributions penalty-free any time (although you likely shouldn’t since you need that money to save for retirement).
You’ll probably have a broader choice of investments. You can open a Roth IRA with many different brokers or other financial institutions and you’ll have lots of investment choices. Your investment options with a 401(k) are generally much more limited, as you’ll often have a choice of a dozen or fewer funds to invest in.

There are upper income limits for a Roth, and the contribution limit is lower than with a 401(k). But it’s still a really great retirement account option if you don’t get a 401(k) match.

Which account is right for you?

Ultimately, there are many choices of tax-advantaged accounts to help you save for retirement.

Research your choices, pick one ASAP, and start investing. You owe it to yourself to build a nest egg that will take care of you in your later years — even if your employer won’t help out with a 401(k) match.

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