Investing in the Golden Years Without a 401(k)

Business.com / Finances / Last Modified: February 22, 2017

A 401(k) is not the be all and end all when it comes to retirement planning. There are other viable alternatives to consider when saving.

A 401(k) is not the end all, be all when it comes to retirement planning. There are other viable alternatives that are just as good. 401(k) enjoys the most popularity out of the many great options that are available to today’s workers, but it's important to be aware of all of the available savings plans.

A 401(k) is a retirement savings account that allows employees to invest in their retirement with a percentage also invested by the employer. Unfortunately, many employers don’t offer 401(k) plans for their own reasons. Maybe they are too small a company to provide such a benefit? Maybe they don’t want to invest in such a move? It could be a number of things, but what are employees to do without it?

Luckily, there are ways around it which will be the topic of discussion today as we highlight some amazing and lucrative 401(k) treatments. Not having a 401(k) does not necessarily have to mean that you'll miss out on the best retirement savings option.

Related ArticleThe 6 Most Common 401k Mistakes

Variable Annuities

Annuities are not a bad option at all. For those who are unfamiliar, an annuity is a contract between an investor and an insurance agency. With this option, you are the investor that purchases a variable annuity on either a single lump sum payment or a series of payments. The insurance company, in return, agrees to make payments to you after your retirement. It is a great way to earn an income post-retirement.

There is a slight downside to this route though; one that has many financial pundits advising caution. Annuities come with high fees and tax penalties particularly when it comes to variable annuities. The best course of action is to know all options concerning annuities and then pick on the one that works best for you.

Index Funds

People are often surprised to hear this term, and even senior citizens express unfamiliarity with the subject. In point of fact, index funds are much like investment funds in that they are based on an index of stocks such as the Dow Jones or the S&P 500. They are different from annuities. In an annuity, you pay for it first and then the money is redistributed to you over the course of years after you retire. Index funds deal with more stocks and investments. 

Having said that, there is a certain amount of risk involved which is practically non-existent if people hang out and chill out at home and watch TV all day. With an index fund, the person is essentially buying and holding securities that make up the benchmark. The return on your investment will determine the performance of the stock you invested in.

Traditional or Roth IRAs

Individual Retirement Accounts work as a great alternative to 401(k)s particularly if you find yourself in a situation where your employer doesn’t offer it. People under 50 years of age can contribute up to $5,000 annually into this program. These retirement accounts, more commonly known as IRA’s have two types; traditional and Roth.

A traditional IRA entitles the account holder to tax benefits immediately rather than later. This means any contributions that person makes are tax deductible. On the other hand, Roth IRA works the exact opposite. They offer tax benefits at a later stage. Furthermore, any contributions made to this type of account are not tax deductible. There are certain requirements for setting up a Roth IRA. We recommend you consult with a retirement planning specialist to determine whether you can quality for one.

Related ArticleThe Working Dead (Until You Plan for Retirement)

SEP IRA’s

Retirement planning is not just for employees but for employers are well, particularly those who own their own businesses. A very specific IRA has been created just for such individuals and the like. People who own their own business can opt for the SEP IRA which is short for Simplified Employee Pension Individual Retirement Account.

At a glance, a SEP IRA is based on the same principles as the traditional IRA. Firstly, it offers the same tax benefits sooner rather than later. The contributions made to this account are tax deductible. Furthermore, a great thing about SEP IRA is that there is no size limit for the business to participate. Any business of any size can establish a SEP, making it ideal for work from home individuals or businessmen alike.

So are you can see, 401(k) is not the end of the line for working individuals. There are other great options to consider that just might work better than a 401(k). The best course of action when confronted with such a scenario where you find all options to be decent is to consult with a retirement planning specialist. These people will offer competent and sound advice to best secure your future.

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