Money Talks, So Should You

Q&A: What if my employer doesn’t offer retirement benefits?

Nola Kulig
by Nola Kulig, The Garrett Network

Without sounding flip, if your employer offers no retirement benefits at all, then you really have some planning to do. But with a sufficiently early start and good savings habits, you can manage to fund your retirement.

Getting an early start is critical for everyone, but especially for those who are funding retirement completely on their own. In fact, in another post, we called it the single most important thing you can do to meet retirement goals.

READ: Five retirement strategies to start now

Your choices of savings vehicles will be more limited. So instead of access to a 401(k) or 403(b), which might have included an employer match, you will likely be using an IRA or Roth IRA. The amount you can contribute to an IRA is limited to $5,500, plus an additional $1,000 “catch up” contribution for those 50 and over. If you do not have an employer retirement savings plan, then you will need to fund your IRAs to the maximum to obtain tax-deferred growth on your savings.

Assuming you are the aggressive saver you will need to be, your taxable portfolio will grow, and you will need to be attentive to how you invest those assets. Use tax-aware funds for stock market exposure and if it is necessary to round out your bond portfolio, consider municipal bond funds for this part of your savings. This will help reduce the tax drag that over many years can eat into your returns.

When you actually retire, one way to obtain guaranteed income is by purchasing a fixed annuity to replace the paycheck you earned while working. Costs and features of these instruments vary widely, however, so be sure to do your research and/or get some qualified help. Importantly, funds used to purchase a fixed annuity will not be available for your heirs; instead, in return for the promise of a guaranteed income stream for life, you have given up a piece of your capital to the insurance company. Another important point is that the longer you can wait to purchase the annuity, the higher your payment will be.

READ: Making the most of your finances

If you really want to be creative, consider having a side business, since self-employment would allow you to sock away much more in tax-deferred savings. There are many types of plans, and a full description of the choices goes beyond the scope of this discussion. But for example, a sole proprietor could open a solo 401(k). This operates the same way as a 401(k) at an employer would, but in this case, you are both employee and employer.

So not only would you be able to save $17,500 as the employee, but as the employer, you would be able to add money until the total reached the combined limit of $51,000. Now that really starts to add up. Of course, you don’t want to jeopardize your day job in the process unless your business is at an appropriate stage to support you indefinitely.


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Nola Kulig, CFA operates Kulig Financial Advisors, a financial planning and investment advisory practice and an office of Garrett Investment Advisors, LLC, a Fee-Only SEC registered firm, in Longmeadow, MA. She has a BA in economics from Whitman College, where she graduated cum laude and Phi Beta Kappa. She is a Chartered Financial Analyst, and a member of the CFA Institute and Hartford, CT CFA Society. She is working toward the Certified Financial PlannerTM designation.