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No 401(k) Match? 2 Even Better Ways to Save for Retirement

By Christy Bieber - Jun 2, 2021 at 6:21AM

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You still have some great options to invest for your future even without a 401(k) match.

When you have a 401(k) match, you should take advantage of it. Matched money is free money and it's worth contributing to get it.

But not everyone works for a company that provides this retirement savings help.

And if you don't, there may actually be two better ways to save for retirement than sticking your cash in a 401(k). Here's what they are. 

Two individuals reviewing financial paperwork.

Image source: Getty Images.

1. Health savings accounts

Although it's not technically a retirement savings account, a health savings account (HSA) is actually one of the best options available to save for your later years. 

That's because HSAs allow you to invest with pre-tax dollars and enjoy tax-deferred growth, just like 401(k)s. But they also allow you to take money out of the account tax-free in retirement, which isn't an option with a traditional 401(k). 

Now, there are some caveats to be aware of. You must be eligible to invest in an HSA before you can contribute, which means you need a qualifying high-deductible health plan. And you can only withdraw money tax-free if you're using it to pay for qualifying health expenses. 

Since many seniors spend six-figure sums on healthcare, that's likely not to be a major downside of HSAs. And you're allowed to take money out penalty-free for any purpose after age 65 -- you'd simply have to pay taxes at your ordinary rate, just as you would with a 401(k). 

If you're eligible to contribute to an HSA and don't have a 401(k) match, this likely should be the first account you should max out. 

2. Roth IRA

A Roth IRA can also be a great alternative to a 401(k), especially if you don't have access to an employer match.

A Roth requires you to contribute with after-tax dollars, unlike a traditional 401(k), which has deductible contributions. But Roth IRAs have a few big advantages over a typical workplace 401(k) plan:

  • You can withdraw money tax-free. As a senior, you won't have to worry about owing the IRS money on your distributions. 
  • Distributions don't render Social Security taxable. You could be taxed on up to 85% of Social Security benefits if "countable" income is too high -- but distributions from a Roth don't count toward countable income. You can take out as much as you'd like without Social Security benefits being impacted.
  • You can take money out on your own schedule. When you have a 401(k), the IRS requires you to begin making required minimum distributions (RMDs) starting at age 72. No RMDs are required with a Roth IRA. 
  • You can withdraw contributions any time. If you take your contributions out of a 401(k), you could face a penalty if you aren't 59 1/2 years old yet. But since Roth contributions are made with after-tax dollars, you can take out the contributions penalty-free any time (although you likely shouldn't since you need that money to save for retirement). 
  • You'll probably have a broader choice of investments. You can open a Roth IRA with many different brokers or other financial institutions and you'll have lots of investment choices. Your investment options with a 401(k) are generally much more limited, as you'll often have a choice of a dozen or fewer funds to invest in.

There are upper income limits for a Roth, and the contribution limit is lower than with a 401(k). But it's still a really great retirement account option if you don't get a 401(k) match. 

Which account is right for you? 

Ultimately, there are many choices of tax-advantaged accounts to help you save for retirement.

Research your choices, pick one ASAP, and start investing. You owe it to yourself to build a nest egg that will take care of you in your later years -- even if your employer won't help out with a 401(k) match.

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