For all this importance, not everyone has them. Teachers, public service workers, the self-employed, or those who work for companies without a retirement plan all have to navigate without a 401k. A new article from The Network Journal discusses what your options are if you find yourself in this situation, as well as the varying saving and investing rules for each.
If you are a federal employee, you likely are one of the 5 million participants in the Thrift Savings Plan, the government version of a 401k. TSP. Federal government workers can contribute up to $18,000 to their plans in 2017 and $24,000 if they’re 50 or older. Contributions to a traditional TSP are deducted from their paychecks before taxes and grow tax-deferred. These are designed to work alongside a government pension as well as Social Security. The government offers a calculator to help you figure out how much to save based on these numbers at tsp.gov. While these are handy, there are still some drawbacks. For one, members of the uniformed services do not get the same matches on their contributions. In addition, they don’t have the flexibility of an IRA or other 401k plans when it comes to withdrawals.
Employees of state and local governments have 457 plans, which are similar to the private sector 401k, but again, there are no matches for contributions. Combine this with the fact that public service employees are more likely to get a pension and only 55% of those with access choose to contribute. However, there are some added benefits, like withdrawing funds from a 457 plan at any time without paying a 10% penalty, although you’ll still have to pay income taxes on withdrawals.
For those on their own, there are still options open. The self-employed can use an SEP-IRA, which lets you set aside up to 20% of your income, sheltered from taxes. Another option is a solo 401k, designed for self-employed people with no employees besides their spouse. This allows for putting a lot more money away, and are no longer burdened with high fees like the have been in the past.