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How to Save for Retirement Without a 401(k)

If you’re frustrated by all the retirement planning advice (including our own) that puts the 401(k) center stage, you’re not alone. Nearly one-third of all workers don’t have access to an employer-sponsored retirement savings plan.1 And even though some employees have a 401(k), not all employers offer to match what their workers put into it.

But even if you don’t have a 401(k) option or if your plan doesn’t include an employer match, don’t panic! You still have plenty of options to help you save for retirement even without a 401(k). With great options like the Roth IRA (our favorite!), Solo 401(k), SEP-IRA plans and a few more you can still reach your retirement goals

Here’s how to save for retirement when you don’t have a 401(k)—starting with our favorite retirement investing tool: the Roth IRA.

What Is a Roth IRA?

The Roth IRA isn’t just an alternative retirement plan. It’s one of the best retirement plans available!


How much will you need for retirement? Find out with this free tool!

IRA stands for Individual Retirement Arrangement (fitting, huh?). IRAs work like your standard workplace 401(k)—without employer contributions, of course. You can contribute a set amount of your annual income to your Roth IRA. And you can even set up automatic contributions, just like with a 401(k). 

You can invest in all kinds of things through your Roth IRA, but good growth stock mutual funds are your best bet for building long-term wealth.

Why are we such big fans of Roth IRAs? Short answer: taxes. With a traditional IRA, your money grows tax-deferred, so you’ll pay taxes when you withdraw it in retirement. In a Roth IRA, you pay taxes up front when you contribute, which means your money grows tax-free (music to our ears) and you can withdraw it tax-free in retirement (even more beautiful music!).

We consider the Roth IRA the rock star of retirement accounts! The plan is available to pretty much everyone (depending on your income), making it a huge part of your retirement investing plan.

Besides the missing employer match, the biggest difference between a 401(k) and a Roth IRA is the Roth IRA has a lower contribution limit than a 401(k).

Now, Roth IRAs do have a couple downsides. And the contribution limit is pretty low compared to the 401(k) limit. In 2023, you can contribute $6,500 to a Roth IRA ($7,500 if you’re 50 or older) compared to the 401(k)’s $22,500 a year limit ($30,000 if you’re 50 or older). But still, the Roth IRA is your best bet if you don’t have access to a 401(k) or if your employer doesn’t offer a 401(k) match.

Before we get into how to open a Roth IRA, we need to hit the brakes and ask, are you ready to invest for retirement?

Here’s how you know you’re ready: You’re debt free (except for your house) and have an emergency fund of 3-6 months of expenses. If that’s you, then it’s time to start investing 15% of your gross income for retirement! If you don’t have a matching 401(k) through your workplace, the Roth IRA is your next stop. And if you hit your limit before you reach your 15% goal, you have other investment options. Don’t worry—we'll go over those too!

How to Open a Roth IRA

In 2023, you can contribute $6,500 a year to your Roth IRA—or $7,500 if you’re 50 or older.2 You can choose from thousands of mutual funds, making it easy to spread out your investments evenly among the four categories we recommend: growth, growth and income, aggressive growth, and international.

You could open a Roth IRA through an investment company, bank or brokerage. But the best way to open an account is with an experienced investing pro who will act as a teacher and a guide. Remember, you should never invest in anything you don’t fully understand. Check out SmartVestor to find a pro in your area who can walk you through each step.

Why Choose Roth Over a Traditional IRA?

Like we talked about earlier, since you pay taxes on the money you put in your Roth IRA when you invest it, you’ll be able to use your savings in retirement tax-free. That means if you contribute the maximum amount each year, you could potentially have a nest egg worth almost $1.5 million after 30 years! We’ve got your attention now, right? And you won’t have to pay a penny in income taxes when you withdraw that money in retirement.

It’s also important to remember that you have no idea what tax rates will be when you reach retirement, especially if you move up in tax brackets throughout your career (aka—get a lot of raises).

With a Roth IRA, you’re paying the current income taxes within your bracket as you contribute. So, when you finally settle down to enjoy that nest egg, you know exactly how much money is yours versus Uncle Sam’s.

What Are the Roth IRA Requirements?

To be eligible to fully contribute to a Roth IRA in 2023, you must:

  • Have an earned income.
  • Have a modified adjusted gross income (which is basically your total gross income minus whatever deductions you claim on your taxes) that’s less than $218,000 for married couples filing jointly or $138,000 for single people to contribute up to the limit.3

What Is a Spousal IRA?

Now listen up, married people, because this is important. Even if you or your spouse doesn’t have an earned income, you can still have two Roth IRAs between both of you thanks to the spousal IRA. For most single-income families, fully funding two Roth IRAs (which adds up to $13,000) will be enough to reach the goal of investing 15% of their income for retirement.

When Should You Choose a Traditional IRA?

If your income is too high to contribute to a Roth IRA, you can go with a traditional IRA. Like a Roth IRA, you can contribute up to $6,500 a year—$7,500 if you’re 50 or older—and you and your spouse can both have an account.4

That’s where the similarities end. Unlike a Roth IRA, there are no annual income limits. But you’re required to begin withdrawing from a traditional IRA once you turn 72, and even though contributions to a traditional IRA are tax-deductible, you’ll have to pay taxes on the money you take from it in retirement.5

Still with us? Now, let’s look at some other options you can explore if you’re self-employed.

Saving for Retirement if You’re Self-Employed

The work-for-yourself life comes with lots of perks—but built-in retirement planning typically isn’t one of them. But that’s no excuse to avoid planning for the future. In fact, it’s more important that you start saving and growing your retirement fund as soon as possible!

Roll Over Your Old 401(k) Into an IRA

Leaving a job to start your own business or freelance work? It’s possible to take your old 401(k) with you! This is called a 401(k) rollover. You can use a direct 401(k) rollover to move a traditional 401(k) into a traditional IRA account or a Roth 401(k) into a Roth IRA account tax-free. A rollover also does not count toward your contribution limit. This allows you to open an IRA, create a nice foundation, and continue investing.

Now, you can potentially roll over your traditional 401(k) into a Roth IRA (a Roth conversion), but there are big tax implications to consider—meaning it might not be the right choice for everyone. And you should never ever withdraw the money yourself to roll over—don't even touch it! That’s considered an early withdrawal and you’ll get slapped with a 10% early withdrawal penalty plus a big tax bill. No thank you!

Solo or One-Participant 401(k)

Okay, if you’re self-employed and don't have any employees, a one-participant 401(k)—also known as a solo 401(k)—may be right up your alley. Contributions are tax-deductible, and you can contribute up to $22,500 in 2023 (or $30,000 if you’re age 50 or older). Then, on top of that, you can put in up to 25% of your income—as long as what you contribute is less than $66,000 per year.

If you have or are planning to hire employees, you do not qualify for a solo 401(k). But there’s an exception to the rule. A couple running a business together can both contribute to the plan. If you hire your spouse as part of your company, they can contribute up to the limit plus employer contributions.

Many online brokers offer one-participant 401(k) plans for self-employed individuals. Something to keep in mind is that once your account hits $250,0006, you’ll have to file annual paperwork with the IRS. Setting up a Solo 401(k) plan can be a bit tricky, so you should sit down with an investment pro to walk you through the nitty-gritty steps.

Simplified Employee Pension IRA (SEP-IRA)

Another option for self-employed folks is the SEP-IRA. They’re primarily used by small-business owners who want to help their employees with retirement, but freelancers and the self-employed can also use this option. An advantage of the SEP-IRA is a much higher contribution limit than traditional and Roth IRAs, but unfortunately, there is no Roth option. You can contribute to your own retirement this way, but again, you can’t exceed either 25% of your income or $66,000 (whichever one’s less).7

This is a good plan to consider if you’re thinking about hiring employees in the future as your business grows. But remember,  contributions made to yourself must be the same percentage made to your employees. So, if you put 15% of your salary into your account, you must also contribute 15% of your employee’s salary into their plan.

SEP-IRAs are also typically a little easier to manage since they require less paperwork than a solo 401(k). But even if the process is simpler than a solo 401(k), don’t be careless. For your own peace of mind, you need 100% confidence in your plan, especially if you have employees. Again, this is where an investment professional can help.

Now, let’s explore another retirement option for small-business owners with employees.

What if I Run a Small Business With Employees?

Once you have employees, the rules of the road change a bit. We have already talked about the SEP-IRA. Another great choice is a SIMPLE IRA, which requires you to offer up to a 3% match for your employees every year—and contributions are tax-deductible. SIMPLE IRAs come with an individual contribution limit of $15,500 a year.8

Retirement Option


Yearly Max (under 50 years old)

Roth IRA

Any Earned Income


Traditional IRA

Any Earned Income


One-Participant 401(k)


$22,500 (and anything up to 25% of income)


Self-Employed/Small Business

25% of earned income (up to $66,000)


Small Business


What Other Options Do I Have?

Still not sure which plan is right for you? There are some other options worth looking into, especially if you work for a nonprofit organization or the federal government.

403(b) Plan

If you work for a nonprofit or other tax-exempt organization, a 403(b) plan is another great pretax investment option that works a lot like a 401(k). Organizations that offer 403(b) plans include public schools and colleges, churches, and tax-exempt charities. Some employers also offer a Roth 403(b) option.9

Thrift Savings Plan (TSP)

Federal employees can save for retirement through the Thrift Savings Plan (TSP). TSPs usually come with matching contributions and allow you to make after-tax contributions with the added plus of tax-free withdrawals when you retire. You can also choose how to split your TSP contribution among several investment options.

Taxable Investment Account

Now, if you don’t have any of the above options or if you’re able to save more once you max out your 401(k) and IRA options, contributing to a taxable investment account is a great way to hit your 15% investment goal.

Get Started Today!

Phew! That was a lot of information! Don’t know where to start? With SmartVestor—our nationwide investing network—you can find an investment pro near you who can help you decide which one of the investment options we just talked about is right for you. You can even set up automatic contributions to make retirement saving as convenient as a 401(k). Find your SmartVestor Pro today!

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This article provides general guidelines about investing topics. Your situation may be unique. If you have questions, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros. 

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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