How to best save for retirement if your employer does not offer a 401(k).
If you’re looking to grow your retirement savings, a 401(k) can be a game-changer—but what if your employer doesn’t offer one or what if you don’t have an employer at all? Let’s break it down and explore your options for securing a rock-solid financial future. The options will vary depending on if you are self-employed or just working for a business that does not offer a 401(k) or other retirement account.
How Does A 401(k) Work To Help Save For Retirement?
A 401(k) is a tax-advantaged retirement savings plan typically offered by employers. Contributions are either pre-tax (Traditional 401(k)) or post-tax (Roth 401(k)), allowing your money to grow tax-deferred or tax-free, respectively.
Employers often provide matching contributions, which are essentially free money to boost your retirement savings. If nothing else, you should contribute at least enough to get the full employer match.
In 2025, you can contribute up to $23,500 to a 401(k) as an employee. If you are 50 or older, you can also make an additional $7,500 catch-up contribution. The limits are even higher if you have self-employment income.
Is It Possible To Open A 401(k) Without An Employer?
Unfortunately, you cannot open a standard 401(k) alone; an employer must set it up. However, if you’re self-employed, an alternative called a Solo 401(k) lets you take advantage of this powerful retirement-savings tool without a traditional employer.
What If Your Employer Doesn’t Offer A 401(k)?
Not all companies offer 401(k) plans, but don’t let that stop you from achieving your retirement goals! Here are a few alternatives.
Traditional Or Roth IRA
These individual retirement accounts allow tax-advantaged savings, though the contribution limits are lower than a 401(k).
Brokerage Account
While not tax-advantaged, investing in a taxable account gives you flexibility and access to a wide variety of investment options. This is also a great place to build toward financial freedom once you’ve already maxed out your other retirement accounts.
Self-Employment Retirement Plans
If you have freelance income, a Solo 401(k), SEP-IRA, SIMPLE IRA and Cash Balance Plans may be excellent alternatives.
Can You Open A 401(k) Without An Active Job?
If you don’t have an employer or any earned income, you won’t be able to contribute to a 401(k). Retirement accounts require earned income (salary, wages, self-employment earnings) to fund contributions. However, you can still invest in taxable accounts or consider spousal IRA contributions if your spouse has income.
You can fund an IRA or Roth IRA if you have earned income during a tax year, even if you no longer have an active job.
Can You Open A 401(k) As A Self-Employed Worker?
Absolutely! If you run a business or work as a freelancer, you can open a Solo 401(k) (sometimes called an Individual 401(k)). As far as tax-planning strategies for small business owners, this is one of my favorites.
This lets you contribute as both the employer and employee, potentially allowing for higher contribution limits than a traditional 401(k). For 2025, you can potentially contribute up to $70,000 into a Solo 401(k), plus the $7,500 catch-up contribution. Think of how much money this could save you on taxes over time.
Other options for self-employed individuals include:
- SEP IRA: Great for those with fluctuating incomes, allowing for tax-deductible contributions.
- SIMPLE IRA: A retirement plan designed for small businesses with fewer administrative burdens.
While traditional 401(k)s require an employer to set them up, you still have plenty of ways to save for retirement, even if you’re self-employed or working at a company without a plan. The key is finding the best fit for your financial situation and maximizing tax advantages.