5 Alternatives to 401(k) to Save for Retirement

retirement couple 401(k)

Your employer’s 401(k) is probably the easiest and most convenient way for you to start saving for retirement. Unfortunately, almost a quarter of all small business owners (who employ an overwhelming majority of workers) do not offer a 401(k) option due to several issues such as:

  • They need to match the contributions
  • Their businesses are too small to offer a 401(k) plan
  • They do not have the capacity to offer these plans

However, these are not the only reasons why some people may not be taking advantage of the kind of financial security and convenience that a 401(k) would offer in retirement. Some may simply not like the kind of investment opportunities offered by their 401(k), or maybe they just want to diversify, and a 401(k) seems too confining.

1/4 of small business owners do not offer a 401(k) option

If you are one of these people, rest assured that the fact you want to diversify is a good thing. After all, they say you should never put your nest eggs in one basket.

Alternatives to a 401(K) Retirement Savings Plan


Whether you prefer saving for your retirement through a 401(k) plan or not, one thing is for certain: you need to save for your retirement. For that purpose, consider any one of these alternatives (or a combination):

Earn Extra Cash

There isn’t a single person who wouldn’t like to earn more cash. Unfortunately, you may have more expenses than you do income and as such might think that you do not have the money to put into a retirement fund. If this is the case, you have two options:

  • Find a way to cut down your expenses and save the extra cash
  • Find ways to earn more cash

The better alternative is to come up with a combination of these two plans. There is always something you can cut out of your monthly expenses. Maybe you eat out a lot? You can minimize or completely do away with it and start cooking at home. It is cheaper and can even be healthier.

An excellent alternative is to find ways to earn extra cash. You will be surprised at the number of people willing to pay you for your expertise both off and online. All you have to do is position yourself as a consultant or a freelancer with expertise, and you will find clients (with the right kind of self-promotion). You can channel the extra cash you make into a retirement account.

Traditional IRA

Although a 401(k) account is one of the most popular retirement savings accounts, it is not the only one worth considering. A traditional IRA (Individual Retirement Account) is an account to which you can channel your retirement funds. The best part is that you do not even have to pay taxes on your contributions until such a time as when you withdraw money from it. This is one of the fastest growing accounts because your dividends, capital gains, and interest payments are compounded annually and not taxed.

Additionally, these types of accounts have more investment options than your typical 401(k). The only issue is that they have much lower contribution limits and they do not offer “employer match” options.

Robo Advisors

Everything is getting automated these days, even investing. Robo advisors are highly sophisticated online services that help individuals manage their investments. They are algorithms that take your risk tolerance into the equation and diversify your portfolio accordingly. The best part is that these programs do not require the biased or daily input of a financial advisor. All you have to do is ensure that the system reflects your risk tolerance and investment preferences from time to time.

Roth IRA

As an after-tax retirement savings account, a Roth IRA is somewhere you can channel money that has already been taxed, and as such it is free to grow within that account tax-free. This also means that you do not have to pay income tax on the withdrawals you make in retirement.

Roth IRAs do not have any age restrictions and differ from a traditional IRA in that they offer you more flexibility. Plus, with a Roth IRA, unlike a traditional IRA, you are not required by law to withdraw your money after a certain age.

Solo 401(k)

retirement couple

If you are self-employed, then you should consider setting up a Solo 401(k). It is very much like the traditional 401(k) except for the little fact that you can contribute as both the employee and match that contribution as the employer as well. This gives you an opportunity to contribute much more to your own retirement account. The main problem with a Solo 401(k) is that it takes a little longer to set up than the other plans. You also need to set the plan up within a given calendar year if you wish to contribute for that year.

For example, if you wanted to set up and contribute to a Solo 401(k) for 2019, then you have to set it up by the 31st of December. The best part is that once you have it set up, you can continue contributing for this year until your tax return due date in 2020.

The best way to go about retirement is to find a system or plan that works for you. One that minimizes the amount of taxes you will have to pay on it while maximizing how much you can contribute to it.  If you can automate that system so that you have a chunk of your income going directly into the account without necessarily passing through your personal account first the better.

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