My Company Doesn’t Offer a Retirement Savings Plan

I work at a job that I really really like. One of the few downsides is that there is no such thing as a 401(k) and I know there won’t ever be one. So as a 30-year-old, I have a Roth IRA set up for retirement. And all the articles say “Contribute to your 401(k)!” but what if that is not an option? Should I have a traditional IRA as well? Should I invest in a jar to stuff my money into? — K.K.

Clearly, you are in saving mode, contributing the annual maximum of $5,000 to your Roth IRA account, and I bet that if your company did offer a 401(k) plan, you’d invest enough to get a company match (if your company offered a match), and maybe even more than that.

Okay, so your company doesn’t have a 401(k) plan. That’s fine. Having money you want to save, but not knowing where to save it is a good problem to have. You really like your job, and that’s a really great thing. You can make up for the downside of not having a company retirement plan by saving on your own, and you’ve already taken that initiative by opening a Roth IRA. Unfortunately, the $5,000 maximum contribution limit for those under 50 years old is the same for both Roth and traditional IRAs, which means you can contribute to both a Roth and traditional IRA, but that sum can’t equal more than $5,000.

Since you’re focused on saving, I take it you also have a healthy emergency fund? Money to get you by in case you ever lost the job you really, really like? If you are throwing the maximum amount of money at your Roth every year, and then socking a bunch of money into a high-yield savings account, you’re in a good place. Roth projections from Bankrate show that you’re on your way to becoming a millionaire by the time you turn 65.

If you’re still looking for a place to invest your money, there are always taxable investment accounts — investment accounts that aren’t tax sheltered like a 401(k) plan — meaning you’ll pay taxes on money that these accounts earn during tax time. One easy way to get started with investing in a taxable investment account is checking out a site like Betterment, which simplifies the process for you, so you’re deciding how much money you want to invest in stocks and treasury bonds, and not which specific stocks or index funds to put your money into. I’ve spoken with the team at Betterment before, but don’t have a lot of experience with it, so I can’t personally make a recommendation, but other people have had positive experiences with it. Reuter’s Felix Salmon has more on it here.

But K.K., even if you decide to just stick with the Roth and a good ‘ol fashioned savings account, I think you’re doing just fine.

Previously: Why We Need Mentors

Photo: Richard Cocks

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