Saving for retirement is an important part of a long-term financial plan, even if you don’t get help with a 401(k) through work.
In 2020, some 33% of private industry workers didn’t have access to an employer-sponsored retirement plan, according to data from the Bureau of Labor Statistics. Part-time workers, those in service industries and those who made the lowest wages were the least likely to have any kind of help saving for retirement from their employer.
Fortunately, there are ways to save for retirement outside of a traditional employer-sponsored 401(k) plan.
Roth and traditional IRAs
Often the first thing advisors recommend to those who don’t have an employer-sponsored 401(k) is opening a Roth individual retirement account, where you’d set up your own contributions with after-tax dollars.
“I love the Roth IRA for young investors,” said Tess Zigo, a certified financial planner at Emerge Wealth Strategies in Lisle, Illinois, adding that this is because young people are usually in a lower tax bracket early in their careers than they will be later.
Saving money in a Roth IRA means the funds will grow tax-free, meaning you don’t have to pay anything to withdraw the money in retirement. People using a Roth IRA can also put away a nice chunk of money each year. In 2021, the total you can save in a Roth IRA is $6,000, or $7,000 if you’re 50 or older.