No 401(k) at work? Here’s how you can save for retirement.

If you have a 401(k) at work, saving for retirement can be fairly easy and straightforward.

But what if your employer doesn’t offer a retirement plan? Or what if you’re self-employed? Fortunately, you have options to save for your retirement.


2 options designed for all investors

  1. Consider contributing to a traditional or Roth IRA. Both types of accounts offer long-term tax advantages. Anyone who has earned income can contribute up to $6,000 ($7,000 if you’re age 50 or older) each tax year.
  2. You can also choose to save in a taxable account. While you won’t get any tax breaks, you’re still saving—and you don’t have income or contribution level limits.


3 options designed for self-employed investors

If you’re self-employed* and looking for other options, you might consider a SEP-IRA, a SIMPLE IRA, or an Individual 401(k). For all of these options, you’re the employer and the employee.

  1. SEP-IRA. A SEP-IRA allows an employer to contribute to an employee’s account up to 25% of the employee’s compensation, up to $57,000 for the 2020 tax year. If you’re self-employed, you can make a maximum contribution of 20% of your net income reported on IRS Schedule C, minus the self-employment tax.**

A SEP-IRA is easy to set up, and you can even establish an account after the end of the calendar year—you only need to open and fund the account before the tax-filing deadline.

     2. SIMPLE IRA. A SIMPLE IRA features both employee salary deferral contributions of up to $13,500 ($16,500 if you’re age 50 or older) for the 2019 tax year and an employer matching contribution of up to 3% of compensation.

A SIMPLE IRA is also easy to establish, but the deadlines are stricter. Generally, you must open a SIMPLE IRA by October 1 to contribute for the current tax year.

     3. Individual 401(k). An Individual 401(k) could be a cost-effective and appropriate option for business owners with no employees (other than a spouse). They offer potentially higher contribution amounts and the flexibility to choose either pre-tax or Roth employee salary deferrals of up to $19,000 ($25,000 if you’re age 50 or older) for the 2019 tax year.

Employer contributions†are identical to the SEP-IRA (up to 25% of the employee’s compensation with a maximum of $56,000 for the 2019 tax year).


Save when you can

No matter what type of account you choose, you may want to consider investing more money when you’re earning more income to cover any future breaks in your employment. Of course, you’ll also want to check with a tax advisor to make sure you’re making an appropriate decision for your situation.

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