Can You Have a 401(k) If Your Employer Doesn’t Offer One?

A 401(k) plan is an employer-sponsored retirement savings vehicle, allowing employees to contribute a portion of their wages, often pre-tax, into an individual account. Contributions and investment earnings typically grow tax-deferred until retirement. Many employers also provide matching contributions, which can significantly boost savings. Not all employers offer a 401(k) plan, leading many to seek alternative ways to save for their future. This article details other retirement savings options available.

Individual Retirement Accounts

Individual Retirement Accounts (IRAs) are accessible alternatives for retirement savings. These accounts offer tax advantages, and both Traditional and Roth IRAs allow annual contributions. They provide flexibility in how contributions are taxed and how withdrawals are treated in retirement.

A Traditional IRA permits tax-deductible contributions. For 2025, individuals can contribute up to $7,000, with an additional $1,000 catch-up contribution for those aged 50 and over. Money within a Traditional IRA grows tax-deferred. Contribution deductibility may be limited if you or your spouse are covered by a workplace retirement plan and your modified adjusted gross income (MAGI) exceeds certain thresholds. Withdrawals are taxed as ordinary income in retirement, and a 10% penalty applies to withdrawals before age 59½. Required Minimum Distributions (RMDs) begin at age 73.

In contrast, a Roth IRA is funded with after-tax contributions. It offers tax-free growth and qualified tax-free withdrawals in retirement. The same contribution limits apply as for Traditional IRAs in 2025. Eligibility to contribute directly is subject to income limitations; for 2025, single filers can contribute fully if their MAGI is less than $150,000, and married couples filing jointly if their MAGI is less than $236,000. For qualified tax-free withdrawals of earnings, the account must be open for at least five tax years, and the account holder must be age 59½ or older.

Opening an IRA requires choosing a financial institution or brokerage firm that offers these accounts. You will need personal information, such as your Social Security number and bank account details, for the application. Most institutions allow online account opening, which involves completing an application and electronically signing documents.

Once established, an IRA can be funded through electronic transfers, direct deposit from your paycheck, or rolling over funds from another retirement account. Setting up regular, automatic contributions helps maximize annual limits. The selection of investments within the IRA, such as mutual funds or exchange-traded funds, is distinct from the account itself and should align with your financial goals and risk tolerance.

Retirement Plans for the Self-Employed

For individuals with self-employment income, specific retirement plans offer higher contribution limits. These options are suitable for freelancers, independent contractors, and small business owners who do not have full-time employees other than themselves or a spouse.

A Solo 401(k) is designed for business owners with no full-time employees, excluding a spouse who works for the business. This plan allows contributions as both an employee and an employer. For 2025, the employee contribution is $23,500, with an additional catch-up contribution of $7,500 for those aged 50-59, or $11,250 for those aged 60-63. The employer profit-sharing contribution can be up to 25% of your net self-employment earnings. Combined employee and employer contributions are capped at $70,000 for those under age 50, and up to $77,500 or $81,250 for those aged 50 and older. Contributions are pre-tax, leading to tax-deferred growth.

Establishing a Solo 401(k) requires obtaining an Employer Identification Number (EIN) for your business. You will need to select a financial institution or plan administrator that offers Solo 401(k) plans. This involves setting up a trust or custodial account to hold the plan assets. Contributions can then be made to these accounts.

The Simplified Employee Pension (SEP) IRA is another option for the self-employed. This plan is less complex to administer than a Solo 401(k). Contributions to a SEP IRA are made solely by the employer (the business owner acting as employer), and only pre-tax funds are allowed. For 2025, you can contribute up to 25% of your compensation, with an annual maximum contribution of $70,000. No employee elective deferrals or catch-up contributions are permitted.

Setting up a SEP IRA is simpler than a Solo 401(k). You open a SEP IRA account at a financial institution for yourself and any eligible employees. Contributions can then be made directly to these accounts. The deadline for establishing and funding a SEP IRA for a given tax year is the tax filing deadline of your business, including extensions.

Additional Investment Approaches

Beyond dedicated retirement accounts, other investment vehicles can supplement your savings strategy. These approaches are useful once you have maximized contributions to tax-advantaged retirement plans.

Taxable brokerage accounts offer flexibility without the contribution limits or withdrawal restrictions of retirement plans. Funds can be accessed at any time without penalty. Investment gains, such as dividends and capital gains, are subject to taxation in the year they are realized. These accounts are often utilized after individuals have fully funded their IRAs and other available tax-advantaged retirement plans.

Health Savings Accounts (HSAs) save for future healthcare expenses and function as a retirement savings vehicle. To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP). For 2025, an HDHP must meet specific deductible and out-of-pocket maximum thresholds. HSAs offer a “triple tax advantage”: contributions are tax-deductible, the money grows tax-free, and withdrawals are tax-free when used for qualified medical expenses.

For 2025, individuals with self-only HDHP coverage can contribute up to $4,300 to an HSA, and those with family coverage up to $8,550. An additional $1,000 catch-up contribution is allowed for individuals aged 55 and over. After age 65, withdrawals for any purpose are taxed as ordinary income, similar to a Traditional IRA, if not used for qualified medical expenses.