A 401(k) is a retirement savings plan that an employer usually sponsors for their employees. Through a 401(k), employees invest a certain amount of money from their paycheck before it is taxed.
However, it is still possible to save up for your retirement even if you don’t have a 401(k). William Schantz of Mid Atlantic Financial LLC will give you some useful advice on how to do so.
5 Tips on Saving Money for Retirement without 401(k)
Consider an IRA
An IRA is an Individual Retirement Account. It’s a retirement savings account that offers various tax advantages. You can open an IRA at most banks and brokerage firms.
By using a traditional IRA, you get a tax deduction for the money you contribute. The money then grows without having any tax incurred till the time you make withdrawals after retirement. Through a Roth IRA, there is no tax deduction after you have contributed. But the money you withdraw in retirement is tax-free.
You can contribute to an IRA even if you don’t have a 401(k). And there’s no income limit to qualify for a Roth IRA. So, if your employer doesn’t offer a retirement savings plan, or if you’re self-employed, an IRA could be a good option for you.
According to William Schantz, one of the best things you can do for your future is to make saving automatic. That way, you don’t have to think about it or make a conscious decision to save each month.
You can do this by having a certain amount of money automatically transferred from your checking account to your savings account or retirement account every month. Or you could set up automatic contributions to an IRA.
If you get a raise at work, or if you come into some extra money, you can also increase your automatic contribution. Just be sure to keep an eye on your overall budget so that you’re still able to cover your expenses and live comfortably.
Health Savings Account (HSA)
For those who have signed up for a high-deductible health insurance plan, they may avail a Health Savings Account (HSA). This is a special savings account that can be used to pay for various medical expenses that meet certain requirements.
You can use an HSA to save for retirement. That’s because the money in the account can be invested and will grow over time. And when you retire, you can use the money in your HSA to pay for health care costs in retirement.
Investing More and More
As your income grows, you’ll be able to save more and more money for retirement. But even if your income stays the same, you can still save more by investing wisely.
One way to do this is to invest in a low-cost index fund. This is a type of investment that tracks a major market index, such as the S&P 500. Index funds are a good option because they’re diversified and they have low fees.
William Schantz also recommends investing to buy individual stocks. This can be riskier than investing in an index fund, but if you choose the right stocks, you could make more money.
You can also invest in bonds. These are loans that you make to businesses or governments. They typically pay a fixed rate of interest. Bonds are generally less risky than stocks, but they also tend to provide lower returns.
Saving for retirement doesn’t have to be difficult. By following these tips from William Schantz, you can make it easier and more enjoyable. You’ll be on your way to a comfortable retirement in no time.