Retirement Savings Alternatives: Secure Your Future Without a 401(k)

How to save for retirement

Phil Blancato on how to financially prepare for the future.

There's a reason 401(k) plans are so popular. Not only do they come with generous annual contribution limits, but many employers that sponsor 401(k)s also match worker contributions to some degree. That means if you participate in a 401(k), you could enjoy free money in that account.

But 401(k)s can be expensive and cumbersome to maintain, so not every employer offers them. If you don't have access to a 401(k), don't worry -- there are other ways to sock money away for retirement. Here are three options to look at.

1. An IRA

The annual contribution limits for IRAs are much lower than what 401(k)s allow for. Currently, IRAs max out at $6,000 a year for savers under 50 and $7,000 a year for those 50 and over. But you can still grow a lot of wealth in an IRA, and there's a benefit to saving in one.

When you save in a 401(k), you're often limited to a handful of funds in which to invest your money. Some of those funds may charge hefty fees that eat away at your returns, while others may not align with your personal strategy or appetite for risk. IRAs, on the other hand, allow you to buy individual stocks for your retirement portfolio, so they're a reasonable alternative to 401(k)s on that basis alone.

2. An HSA

You may not think of a health savings account, or HSA, as a retirement plan, but actually, it can easily be used as one. With an HSA, you set funds aside on a pre-tax basis to cover qualified medical expenses. That money can be withdrawn at any time -- in the near term if you need it, or during retirement, when your healthcare costs are likely to skyrocket.

The only catch with HSAs is that to qualify to contribute to one, you must be enrolled in a high-deductible health insurance plan. But if you are, you can contribute money today that you earmark for the future. Like 401(k)s and IRAs, HSAs let you invest your money so it can grow into a larger sum, and withdrawals are tax-free as long as they're used for eligible medical expenses.

Currently, HSAs max out at $3,600 for individuals under 50 and $7,200 for families where the account holder is under 55. When the account holder is 55 or older, these limits increase to $4,600 and $8,200, respectively.

3. A traditional brokerage account

When you put money into a traditional brokerage account, you don't get any tax benefits. But you do get flexibility. Unlike IRAs and HSAs, there's no limit as to how much money you can invest in a traditional brokerage account each year. And you also won't be restricted as to how you invest.

If you're going to use a brokerage account to save for retirement, you'll need to be really disciplined, since there's no financial penalty for cashing out investments before you reach the end of your career (whereas with a 401(k) or IRA, you'll be penalized if you withdraw funds prior to age 59 1/2). But if you trust yourself to keep that money untouched until retirement, it's a great option to look at.

Not having access to a 401(k) may seem like a deterrent on the road to building retirement wealth, but it doesn't have to be. If you can't participate in a 401(k), use an IRA, an HSA, a traditional brokerage account, or a combination of all three. You may be surprised at how much money you can accrue over time by making the most of these alternatives.