No 401(k)? Your other options

In his debut article, Allworth Co-CEO Pat McClain shares some alternative ways to save for retirement if you don't have access to a 401(k).


Aside the Monthly Market Update, which is written by our chief investment officer, Andy Stout, most of you reading this are aware that my long-time business partner and Allworth Co-Founder, Scott Hanson, has been writing our weekly articles for years.

However, going forward, I’ll be standing in for him from time-to-time to pen a few of my own.

This week’s article is directed at three groups: Those of you who are business owners (or otherwise self-employed); those of you who work for a small company that doesn’t offer an employer sponsored retirement plan; and, finally, those of you who might well have an employer-sponsored plan (401(k)) but want to learn about a few investment vehicles that could help you save even more for retirement.

First, here are some plans for the self-employed, owners of small businesses, and their employees.

Comprising more than 30 percent of our total workforce, almost 47 million Americans either own a small business or work for someone who does, but don’t have access to a 401(k).1

Those numbers include many of our more than 14,000 clients and illustrate that a lot of working people are virtually 100 percent responsible for both organizing and accumulating their retirement nest egg.

But for both small business owners and their employees, there are options.  

Consider a Savings Incentive Match Plan for Employees IRA

Often referred to as a SIMPLE IRA, if you are a business owner, you can make contributions for the benefit of your employees into a SIMPLE IRA if you are able to achieve one of these two benchmarks:

  • You contribute (to the plan) an amount equal to two percent of your employees’ salaries
  • Or you match the contributions of your workers (up to three percent of their salaries)

Other advantages of a SIMPLE IRA include things like employees being 100 percent vested (all the money is theirs) right from the jump, and as the employer, your contributions are tax deductible.

The SIMPLE IRA employee contribution limit for 2021 is $13,500, but if you are 50 or older, that amount bumps up to $16,500. (And while that is below the contribution amounts that are allowed for 401(k)s, it’s certainly nothing to sneeze at.)

Simplified Employee Pension Plan

More commonly known by the acronym “SEP,” these are actually defined contribution retirement plans (don’t let the word “pension” fool you) for entrepreneurs, small business owners, and those folks who are otherwise self-employed. Business owners who launch SEPs need to remember that they legally must make them available to every employee who:

  • Earns at least $600 a year
  • Is at least 21 years of age
  • Has worked for the company for three of the last five years

Solo 401(k)

A Solo 401(k) is for those lone wolves who have zero employees (though a spouse who works at least some of the time for you is, in fact, eligible).

The great thing about a Solo 401(k) is that you’re allowed to contribute to the plan as both an employer and as an employee. (Which really means that, under the right circumstance, you’ll get to stash more of your hard-earned money away than perhaps any other self-employed retirement plan.)

How much?

For 2021, potentially up to $58,000 if you are under 50 years of age, and up to $63,500 once you reach your Golden birthday (50).

Options for Individual Retirement Plans

If you don’t have access to an employer sponsor retirement plan (401(k), 403b, 457), or you have access to one and you want to save even more than you already are, then you might want to go the Individual Retirement Account (IRA) route.

Here are some options.

You could contribute to a traditional IRA

One of the main qualifiers for launching a traditional IRA is that you need to have taxable income (in other words, you aren’t going to be able to open one if you work for yourself and you pay no income tax because you show a loss).  

While the contribution limits are sadly low ($6,000 for those of you under 50, and $7,000 for those of you who are 50 and older) when compared to a 401(k)), they are typically tax deductible, and offer a fairly wide range of investments. All that, and just like a 401(k), your savings are not only pre-tax, but they grow tax deferred.

You could contribute to a Roth IRA

Roth IRAs can be terrific savings vehicles.

If your income in 2021 is less than $140,000 (or $208,000 for married couples), you can contribute to a Roth IRA. While the amount you can put away is the same as a traditional IRA ($6,000/$7,000), there’s a very nice bonus: With a Roth IRA, yes, you invest after tax money, but when you retire (or in an emergency) and you want to take withdrawals? Not only has the money been growing tax free, but if certain criteria are also met, the withdrawals (including all the growth) are free from taxes.

And here’s a bonus savings strategy for married couples: The "spousal" IRA

When one spouse doesn’t work (or earns very little income), a spousal IRA strategy could help you save more.

Here’s how it works.

A spousal IRA is a nifty little approach to saving that allows a working spouse to contribute to a traditional IRA (or a Roth IRA) in the name of the non-working spouse (and the working spouse can still contribute to a traditional or Roth IRA in their own name).

A spousal IRA strategy could double the amount of money a couple can save, even though one spouse has no (or very little) taxable income.  


Sooner or later, practically everyone comes to grips with the fact that they must save more for retirement. And while surely a defined contribution plan, with its employer sponsorship and automatic, pre-tax deductions, makes getting hooked on saving that much easier, not everyone has access to a 401(k).

It’s been my experience that it pays to save as much as you can in as many viable vehicles as possible.

Besides having virtually everything to gain and very little to lose, saving is a habit that isn’t bad for your health and feels amazing.


1 https://www.pewresearch.org/fact-tank/2019/08/29/facts-about-american-workers/