Retiring Without a 401(k): What to Know

The 401(k) is one of the most common retirement savings tools in America, but not everyone has access to one. If you’re self-employed, work for a small business that doesn’t offer one, or simply never enrolled, you might wonder how to plan for your future effectively without it.

Luckily, it’s possible to save and invest for retirement without a 401(k). Doing so requires careful planning and proactive saving. In this article, we’ll discuss the challenges of retiring without a 401(k), optimal alternative savings vehicles, and how much you should aim to invest each month.

Challenges of Retiring Without a 401(k)

Not having access to a 401(k) means missing out on key benefits that make retirement saving easier. These employer-sponsored plans often include automatic payroll deductions, employer matching, and professionally managed investment options, all of which simplify the process of building significant retirement savings. Without a 401(k), you’ll need to take a more hands-on approach to saving and investing.

Below are notable challenges when you’re planning for retirement lacking a 401(k) plan:

1. No Employer Contributions

One of the biggest advantages of a 401(k) is employer matching, essentially free money that boosts your savings. Without this benefit, you’re solely responsible for funding your retirement, which can require more aggressive saving strategies to make up the difference.

2. More Investment Responsibility

Many 401(k) plans offer pre-selected investment options, including target-date funds that automatically adjust risk over time. Without one, you’ll need to choose and manage investments yourself, whether through an IRA, taxable brokerage account, or other vehicles. For inexperienced investors, this can be overwhelming and may require professional guidance.

3. No Automatic Payroll Deductions

401(k) plans make saving effortless by automatically diverting a portion of your paycheck into your retirement account. Without this built-in structure, staying consistent with contributions requires more discipline, as you’ll need to set up and maintain your own deposit schedule.

4. Lower Contribution Limits

Alternative retirement accounts have lower contribution limits than a 401(k), making it harder to maximize tax-advantaged savings. In 2025, you can contribute up to $23,500 to a 401(k) ($31,000 if over 50), whereas IRAs are capped at $7,000 ($8,000 if over 50). This difference means you may need to rely on taxable brokerage accounts or other investments to reach your savings goals.

Retirement Savings Alternatives

Even without an employer-sponsored plan, there are several other ways you can save and invest for retirement. Many of these offer tax advantages similar to a 401(k), such as a traditional IRA, which follows the same tax-deferred structure.

“Building a retirement nest egg is completely possible without access to an employer-sponsored 401(k) with company match,” says Curt Scott, president and investment advisor representative at Scott Financial Group. He adds that it’s key to assess “the options available and evaluate how each might fit within a specific income situation.”

Here are five of the most common and useful retirement savings vehicles outside of a 401(k):

1. Traditional IRA

A traditional IRA allows you to contribute pre-tax dollars (provided you meet certain income limits) and grow your investments tax-deferred. Withdrawals, like a regular 401(k), are taxed as ordinary income once you reach age 59.5 years. This is a straightforward alternative with similar tax benefits, just with a lower contribution limit.

2. Roth IRA

Roth IRAs are funded with after-tax dollars but offer tax-free growth and withdrawals in retirement. If you expect to be in a higher tax bracket down the road, these can be especially effective. Like traditional IRAs, Roth IRAs have income eligibility requirements that may limit who can contribute directly.

3. SEP IRA

If you’re self-employed or run a small business, a SEP IRA allows you to contribute significantly more than a traditional or Roth IRA. In 2025, you can contribute up to 25% of your income, or $70,000, whichever is less. SEP IRAs are easy to set up and function much like a traditional IRA when it comes to taxation and withdrawals.

4. Health Savings Account (HSA)

If you’re enrolled in a high-deductible health plan (HDHP), an HSA lets you contribute pre-tax dollars, grow investments tax-free, and make tax-free withdrawals for qualified medical expenses. After age 65, you can use the funds for any purpose; however, non-medical withdrawals are taxed as ordinary income. HSAs offer a rare triple tax advantage, making them a versatile tool for retirement planning.

5. Taxable Brokerage

While taxable brokerage accounts don’t offer any tax advantages, they’re still a way for you to save and invest cash beyond what you’ve contributed to the above accounts. Like an IRA, you’re able to invest in a variety of assets, such as mutual funds, exchange-traded funds (ETFs), individual stocks, and bonds. These can function as a supplemental tool to your existing retirement savings.

Mistakes to Avoid While Planning Without a 401(k)

Without a 401(k), the responsibility to save for retirement falls much more on your shoulders than it otherwise would. Unfortunately, this also means that it’s easier to make mistakes that can impact your overall plan. It’s important to be aware of and avoid crucial missteps to remain on track toward the future you want.

Asher Rogovy, chief investment officer of Magnifina, an SEC Registered Investment Adviser (RIA) firm, notes that managing your own investments without a 401(k) can lead to mistakes if you’re not careful. “401(k) accounts typically come with an investment manager who will invest prudently and conservatively. Investors managing their own accounts risk making poor choices which can ruin a retirement.” To avoid such an issue, he recommends investors hire a fiduciary investment manager, “who will select investments suitable for their financial needs and goals.”

Another mistake is simply not investing enough. 401(k) plans automate contributions by taking them straight from your pay. If you don’t have one, you must ensure you’re saving and investing as much as possible on your own. One way to manage this is by establishing recurring payments to your retirement accounts, ensuring you’re frequently contributing cash.

Importance of Early Planning and Proactivity

Planning for retirement is a marathon, not a sprint. It requires careful strategizing and proactivity over many years to ensure you’re on the right track. Without a 401(k), it’s up to you to establish retirement accounts and contribute to them consistently.

The earlier you begin planning for retirement, the more time your money has to grow. Over several decades, the funds in your retirement accounts earn compound interest and can grow substantially.

For example, if you contribute just $300 per month to a Roth IRA starting at age 25 and earn an average annual return of 7%, you’d have over $723,000 by age 65, according to the Investor.gov compound interest calculator. But if you waited until age 35 to start, you’d end up with less than $370,000, a stark reminder of the value of starting early.

The example above doesn’t just highlight the power of early planning; it also underscores how important consistent, proactive saving is. Without a 401(k), you need to ensure you’re regularly contributing to your retirement accounts to take full advantage of compound interest.

How a Financial Advisor Can Help

On its own, retirement planning is a difficult task. But without a 401(k), you assume much more responsibility over your future. For this reason, having a financial advisor by your side can be invaluable to keep you on course.

A high-quality financial advisor should be able to help you put together a comprehensive plan that will empower you to build the retirement you want. Without a holistic strategy in place, it’s hard to know what to do or where you’re going. “One of the biggest mistakes someone can do when planning for retirement without a 401k plan is not having a financial plan at all,” says Brett Bernstein, CFP^®, chief executive officer and co-founder of XML Financial Group. A financial advisor, luckily, can ensure you have a cohesive plan in place to save and invest.

We recommend prioritizing fiduciary financial advisors for retirement planning. These professionals must act in your best interest at all times. Experts with prestigious titles like Certified Financial Planner (CFP) and Chartered Financial Consultant (ChFC) typically have the necessary experience to help you plan for retirement and must abide by high ethical standards.

If you need help finding the right financial advisor, consider using this free matching tool. After a brief quiz regarding your current situation and investment objectives, it’ll pair you with a fiduciary who suits your needs.