Steps to Take If Your Job Lacks Retirement Benefits

Steps to Take If Your Job Lacks Retirement Benefits

Maintaining a quality of life when you retire is vital. But you can’t work forever, and Social Security may not be enough. Many companies provide retirement plans to help with future goals. Pension plans are long gone, but most companies have a 401(k) plan available. But what if your company doesn’t have anything? You could change companies in the hopes of better benefits or chart your retirement course. What are your options?

Individuals Without Retirement Benefits

More than a third of the private sector doesn’t have a work-sponsored retirement plan available. This number jumps for millennials, with more than two-thirds without a plan. About half of Gex Xers participated in a plan, while 56 percent of baby boomers took part in one.

The workforce has changed, and now there are more freelancers or self-employed people who don’t have retirement plans. Many people, like millennials, work part-time and aren’t eligible. Finally, some companies just don’t offer this benefit.

Alternatives to Work-Sponsored Retirement Benefits

Even if your employer doesn’t offer any retirement benefits, you can still save. There are other options. For one, you could encourage your company to start a 401(k). The other option is to find another job that offers benefits. But if these options aren’t practical, here are a couple of alternatives.

Roth Individual Retirement Account

A Roth individual retirement account (IRA) is a sound place to start when saving for retirement. A Roth IRA is different from a traditional one. With a traditional IRA, money is saved pre-taxed. You pay the taxes when you withdraw it at a later date.

But you pay the taxes before saving it in a Roth IRA. Your money is then free to grow tax-free, and you won’t have taxes to pay when you withdraw at retirement. The Roth IRA is flexible because you can withdraw contributions you made into it at any time. You don’t have to wait until retirement. But if you want to withdraw the earnings from your money, you must be at least 59½, and your account must be at least five years old.

You can only put away a certain amount each year. For 2024, the contribution limit is $7,000 for those under 50 and $8,000 for those 50 and older.

Roth IRAs don’t have the required minimum distribution (RMD), which is a plus when you want to retire and have your money grow longer.

You’re not limited to an employer’s plan, so you can comparison shop different companies and choose from various investment portfolios. The Roth IRA is yours and stays with you even if you switch jobs. There’s no scrambling to do something with your money. It’s there and safe.

Young people are great candidates for Roth IRAs because they tend to be in a lower tax bracket. They’re paying Uncle Sam less to save their money.

The best way to set up and fund your Roth IRA is to mimic the auto-saving feature of 401(k) plans. Set up a recurring payment through your checking or savings account and forget about it.

But there are income limits with a Roth IRA. In 2024, a single filer with a modified adjusted gross income of more than $161,000 is not eligible to contribute to a Roth IRA.

Taxable Investment Account

Sometimes called a brokerage account, a taxable investment account is the next step if you’ve maxed out your Roth IRA.

You won’t have any tax advantages, but you can still use it to fund your retirement. These accounts also don’t have any contribution limits. You can invest as much as you need to finance your retirement.

Solo 401(k)

This is for freelancers, sole proprietors, and independent contractors. You can still have a retirement plan despite not having an employer plan.

The solo 401(k) plan is also known as the independent 401(k) plan. In order to participate, you must generate income from your own business. You must run the business on your own or with a spouse. You’ll also need an employer identification number (EIN) to enroll in a plan.

You can contribute to the plan as an employee and as an employer.

Do some research to find the best solo 401(k) for you. Before proceeding, it’s best to talk to a financial advisor.

Create Your Retirement Plan

Many young people work in service industries where retirement plans aren’t offered. These individuals are usually the last to think about the future.

But by using a Roth IRA and contributing at least $50 a month, they could be on their way to saving for retirement.

Independent workers don’t have to go without a funded retirement plan. If you meet the qualifications, you can take advantage of a Roth IRA.

There’s always creating a solo 401(k) to fund your retirement. Regardless, there are options; it just takes some research and discipline.

In today’s ever-changing workforce, traditional retirement benefits are becoming less common. With more freelancers, part-time workers, and companies not offering retirement plans, it’s essential to find alternative options to secure your future. This article will explore different steps you can take if your job lacks retirement benefits.

According to recent statistics, over a third of the private sector doesn’t have a work-sponsored retirement plan available. This number rises significantly among millennials, with more than two-thirds without a plan. While half of Generation Xers participated in a retirement plan, only 56 percent of baby boomers had the opportunity. The changing nature of work, including the rise of freelancers and self-employed individuals, has contributed to this lack of retirement benefits. Additionally, some companies simply do not offer this crucial benefit.

Fortunately, there are alternatives to work-sponsored retirement benefits that individuals can consider. One option is to encourage your current company to start a 401(k) plan. This can be done through conversations with management or HR departments, highlighting the importance of retirement planning for employees. If this is not a viable option, finding another job that offers retirement benefits may be worth considering.

However, if these options do not work for you, there are still other alternatives available. One such option is a Roth Individual Retirement Account (IRA). A Roth IRA differs from a traditional IRA in that taxes are paid upfront before saving the money. This allows the money to grow tax-free, and there are no taxes to pay when you withdraw it during retirement. Additionally, a Roth IRA offers flexibility, allowing you to withdraw contributions at any time without penalties. However, to withdraw earnings, you must be at least 59½ years old, and your account must be at least five years old. There are also income limits for contributing to a Roth IRA, which should be taken into consideration.

Another alternative is a taxable investment account, also known as a brokerage account. While it does not provide tax advantages like an IRA, it still allows you to save for retirement without contribution limits. This flexibility can be beneficial for those who have already maxed out their IRA contributions.

For freelancers, sole proprietors, and independent contractors, a solo 401(k) can be an excellent option. Also known as an independent 401(k), this retirement plan allows individuals to save for retirement despite not having an employer-sponsored plan. To participate in a solo 401(k), you must generate income from your own business and have an employer identification number (EIN). This plan allows you to contribute as both an employee and an employer, providing more flexibility in saving for retirement.

Regardless of your employment situation, it’s crucial to create your retirement plan. Even if your job does not offer retirement benefits, you can still take control of your future. By starting with a Roth IRA and contributing as little as $50 a month, young people, in particular, can begin saving for retirement. Independent workers, such as freelancers, can also benefit from a Roth IRA or consider a solo 401(k) if they meet the qualifications.

In conclusion, not having work-sponsored retirement benefits does not mean you have to go without a funded retirement plan. There are several alternatives available, including Roth IRAs, taxable investment accounts, and solo 401(k)s. By understanding these options and taking the necessary steps to set up and fund your retirement plan, you can secure your future and maintain a quality of life in retirement. It may require some research and discipline, but the effort will be well worth it in the long run.