Don't have a 401(k)? Here's how you can still save for retirement

A 401(k) plan is a solid foundation for any retirement strategy. It comes with tax advantages and employers often match funds, helping to grow your nest egg faster.  

But not everyone can contribute to a 401(k): According to the latest data from the Bureau of Labor Statistics, almost a third (31%) of private-sector workers didn't have access to an employer-provided retirement plan in 2022. 

Here's what you need to know if your company doesn't offer a 401(k) plan, including moves to make to build your retirement fund without one.

• Chip away at high-interest debt
• Open a health savings account
• Invest in an IRA
• Open a brokerage account
• Bottom line

If you're weighed down by huge debt, it won't magically disappear when you turn 65.

"Paying off really high-interest debt can be a great way to improve your overall financial outlook," both now and in the future, says Ben Bakkum, a senior investment strategist at Betterment at Work.

Any debt with an interest rate over 8% is considered high interest, but credit card bills should be a real target: The average credit card interest rate soared from 16.27% in August 2022 to 21.19% in August 2023. That's a lot of money that could be funneled toward savings.

If you don't have access to a 401(k), Bakkum suggests maximizing other company benefits. A health savings account (HSA) lets you put pre-taxed funds aside for qualified medical expenses. About a quarter of employers that offer health insurance have HSA-eligible plans, according to the Kaiser Family Foundation, and there are HSA options on the public health insurance marketplace.

Unlike with a flexible spending account, money in an HSA rolls over from year to year and can be invested to grow tax-free over time. After you reach age 65, those funds can be withdrawn for any reason without a penalty — in essence turning your HSA into an extra retirement account.

If you want to maximize your HSA as a retirement fund, however, you'll need to avoid tapping into it for medical expenses unless absolutely necessary.

In 2024, you can contribute $4,150 annually to an individual HSA plan and $8,300 to a family plan.  

Anyone earning income can open and contribute to an individual retirement account, or IRA. A traditional IRA is taxed when you withdraw funds in retirement (defined as age 59 ½ or older), giving you more money to invest before then. Contributions to a Roth IRA, meanwhile, are made with after-tax dollars. Your money grows tax-free in the account and won't be taxed when you withdraw it.

There are limits to how much you can contribute to an IRA: In 2024, the cap is $7,000 a year, or $8,000 if you're 50 or older. 

The best IRA accounts offer flexibility and low fees, including our overall favorite, Charles Schwab, which offers a variety of no-commission mutual funds and ETF trades. There is also no minimum deposit requirement for active investing.  

For new investors, we recommend Fidelity Investments for its 24-hour customer service support and broad assortment of investment options, including no-transaction-fee (NTF) mutual funds.  

Once you have an IRA set up, Bakkum recommends setting up recurring deposits to avoid the temptation to spend the money before you can invest it.

"When you don't have a 401(k), you risk all that money being dumped in your checking account," he said.

A brokerage account doesn't have the tax advantages of an IRA, but there's also no cap on how much you can invest. Plus, you can withdraw money before retirement without facing a penalty.

You can work with a brokerage house but there are also many top online brokers and trading platforms. CNBC recommends Ally Invests, which doesn't charge a commission fee for stock, ETFs or options trades and has no minimum deposit requirement for self-directed trading.

Ally provides useful calculators to help users analyze their portfolio and there are robo-advisors with four different portfolio types to choose from.

Just because your company doesn't offer a 401(k) doesn't mean you can't save for retirement. Take advantage of other workplace programs, pay off any high-interest debt and invest in an IRA or brokerage account.  

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Ben Bakkum, a senior investment strategist at Betterment at Work.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every investing review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of investing products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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