Retirement Plans When Your Employer Doesn’t Offer One

[abo]

Hey Mustachians!

I just started a new job that doesn't offer a 401k. They offer other great benefits, and plan to offer a 401k in the future (2016) but not now.

Therefore, I am seeking advice into how I should save for retirement! Especially where pre-tax contributions are concerned. My last job was the first job I had that offered benefits and a 401k, so I only have that amount (I was there for a year) to "roll over" and deal with as well.

Thanks for your help!! :)

[MgoSam]

My company doesn't offer a 401k, what I am doing is investing in my ROTH IRA and in Vanguard index funds. I have set it up for weekly automated investments, so that way I don't need to think about it.

[frugaliknowit]

You can contribute to an IRA for 2015 through roughly April 15, 2016, and starting Jan 1, 2016, you can start contributing for 2016, either traditional or Roth.  If you have a mortgage and wish to pre-pay it, you can do that as well (I would suggest after the IRA is full...).  You can also invest in Index Funds outside of any retirement plan.

[abo]

I should mention -- I already have a Roth IRA -- that I max out.

So opening another IRA won't make sense, since I can only contribute a total of $5500 a year in your IRAs combined.

So I need another option. Anyone recommend Solo 401K's?

[terran]

Since you don't have a retirement plan at work you can deduct the contribution to a Traditional IRA regardless of income, so you might consider switching from the Roth.

A solo 401k is only available to the self employed in businesses that only employ owners and their spouses, and no other employees. Do you file schedule c and have no employees?

[abo]

No I suppose I cant file for solo 401k

[abo]

@Terran can you elaborate "Since you don't have a retirement plan at work you can deduct the contribution to a Traditional IRA regardless of income, so you might consider switching from the Roth."

Why would I want to convert my Roth IRA to a IRA -- or just move that to a IRA? I thought opening another IRA won't make sense, since I can only contribute a total of $5500 a year in your IRAs combined.

[terran]

You can recharacterize this years Roth contribution to Traditional if you would like to reduce your taxable income by that $5500, and you could contribute directly next year.

Looks like I was mistaken that a deduction is always allowed if you have no retirement plan at work. The income limit is much higher, but if you have a spouse with a retirement plan at work there is still a limit. That info is here: https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-NOT-Covered-by-a-Retirement-Plan-at-Work

Here is one of the stronger/more enthusiastic arguments against Roth contributions in favor of deductible traditional contributions: http://www.gocurrycracker.com/roth-sucks/. Do your own research, but it's a place to start.

[MDM]

Do your own research....

In particular note that, as https://www.bogleheads.org/wiki/Traditional_versus_Roth states, "The main reason to prefer one type of account over the other is the comparison of marginal tax rates. If your marginal tax rate now is higher than your estimated marginal tax rate at retirement, then the traditional account is better; if it is lower, then the Roth account is better."