Saving for Retirement Without an Employer-Sponsored Plan

ByAshley Hours Categories Retirement Planning

Saving for retirement without access to an employer-sponsored plan, such as a 401(k), may not be a known option for individuals, but there are plenty of ways to build your retirement savings if this applies to you. Whether you’re self-employed, a freelancer, or work for a company that doesn’t offer retirement benefits, you can still save for retirement with earned income. Let’s discuss some ways in which you can do so:

1. Open an Individual Retirement Account (IRA)

IRAs are a great alternative to employer-sponsored plans. You have two main options:

  • Traditional IRA: Contributions may be tax-deductible, and your investments grow tax-deferred until withdrawal in retirement. In 2025, the max traditional IRA contribution limit is $7,000 for those under age 50, and $8,000 for those age 50 or older, which is the same as in 2024
  • Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free, including earnings. You can also contribute to a Roth IRA if you also contribute to a 401(K) through your employer. However, a Roth IRA contributions are subject to income limits determined by the IRS, so ensure you qualify before contributing. For 2025, the Roth IRA contribution limit is $7,000 for those under 50, and $8,000 for those 50 and older.

2. Consider a Solo 401(k) or SEP IRA

If you’re self-employed or a small business owner, you can set up a retirement account designed for independent workers:

  • Solo 401(k): These are viable only for single-person businesses (or with a spouse in the business). In 2025, aggregate contributions can reach up to $70,000 if you are under 50 and $77,500 if you are age 50-59 or age 64 or older. Solo(k)’s offer high contribution limits, including both employer and employee contributions, and the option for Roth contributions.
  • SEP IRA: Allows for employer-only contributions- You can contribute up to 25% of your total compensation or a maximum of $69,000 for 2024 tax year or $70,000 for the 2025 tax year, whichever is less. 

Both options provide tax advantages similar to traditional employer plans.

3. Take Advantage of a Health Savings Account (HSA)

If you have a high-deductible health plan, an HSA can be a powerful retirement savings tool. Contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. After age 65, you can withdraw funds for any purpose (though non-medical withdrawals are taxed like a traditional IRA).

4. Invest in a After-Tax Brokerage Account

While retirement accounts have tax advantages, a taxable brokerage account provides flexibility given there are no penalties associated with shorter term withdrawals. There are also no contribution limits, and you can withdraw funds at any time; however capital gain taxes apply. Investing in a diversified portfolio aligned with your risk tolerance and financial goals can help your money grow over time, and be a great way to save in addition to the retirement strategies mentioned above.

5. Automate Your Savings

Without automatic payroll deductions such as to a 401(K) through your employer, it’s essential to set up your own automatic contributions. Consider:

  • Setting up direct transfers from your checking account to your IRA or brokerage account.
  • Establishing a separate high-yield savings account for retirement contributions or allocated capital.

Navigating retirement savings on your own can be complex. A financial advisor can analyze your personal situation and help craft a tailored investment strategy, optimize tax planning, and ensure you stay on track to meet your retirement goals. While not having an employer-sponsored plan may require extra effort, it doesn’t mean you can’t build a strong retirement fund. By utilizing IRAs, solo 401(k)s, taxable investment accounts, and disciplined savings strategies, you can build your retirement nest egg over time. The key is to start as early as possible and stay consistent with your savings rate and overall financial strategy. If you have any questions on crafting your retirement plan, email info@shermanwealth.com or schedule a complimentary intro call here.