Tags: Brandon | 401k | retirement | IRA

US News: Even Without a 401(k), You Have Options for Retirement Savings

By    |   Thursday, 30 April 2015 08:00 AM

We are repeatedly advised by retirement experts to max out contributions to our 401(k) plans. But many of us work at companies without such plans, or don't even work for a company full time, freelancing instead.

Worry not, you still have vehicles to save for retirement. Emily Brandon, senior retirement editor for U.S. News & World Report, lists several of them.
  • IRAs. You can defer paying income tax on up to $5,500 that you contribute to an IRA, or $6,500 if you're at least 50. "IRAs give you a greater variety of investment options than 401(k) plans, and you can shop around for accounts and funds that charge especially low fees," Brandon explains.
  • Roth IRAs. "They have the same contribution limits as traditional IRAs, but they are taxed differently. You contribute after-tax dollars to Roth IRAs, and then you can withdraw the money, including investment earnings, tax-free in retirement," she writes.
  • If you have maxed out your IRA, you can build your retirement kitty further through a taxable investment account.
"Saving for retirement without a 401(k) plan takes a little more effort. But if you are willing to take some initiative, you can still enjoy many of the tax breaks and investment gains that workers with 401(k) plans enjoy," Brandon writes.

Meanwhile, if you think many full-time employees are ill-prepared for retirement — as a slew of studies indicates they are — imagine what it's like for the 34 percent (and growing) of the American workforce that are freelancers.

"I'm going to have to work until I drop dead," Tom Egan, a graphic designer in his 50s living in Jersey City, N.J., tells CNBC. "I'm way behind in retirement savings."

The problem for freelancers, of course, is that their income stream is irregular, and they don't have employers that will match contributions to a 401(k) plan.

Nathan Schreiber, a 30-something Brooklyn-based illustrator and owner of a startup children's education service, puts the situation in dire terms.

"I'm woefully unprepared for retirement and terrified about it," he tells CNBC. "When I do get a good job, I make a point of saving it."

Technology makes getting more assignments difficult, he says.

"I live frugally, have no debt and have some savings, but things are still tenuous. I think there's going to be a crisis for my generation. Nobody's saving enough, and everybody's living longer. There's a brewing financial apocalypse."

CNBC lists three retirement vehicles for freelancers: A Simplified Employee Pension (SEP) IRA, a Solo or Individual 401(k) plan and a Savings Incentive Match Plan for Employees (SIMPLE) IRA.

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We are repeatedly advised by retirement experts to max out contributions to our 401(k) plans. But many of us work at companies without such plans, or don't even work for a company full time, freelancing instead.
Brandon, 401k, retirement, IRA
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2015-00-30
Thursday, 30 April 2015 08:00 AM
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