Most financial advisors will tell you to use your employer's retirement plan to help you save. But what do you do if your employer doesn't have a plan? Should you just give up and resign yourself to a gruesome retirement?

There's nothing more frustrating than advice you can't use. But when it comes to retirement, you have a lot of options beyond employer-sponsored plans. So don't get discouraged -- you can get rich without your employer.

Going without a 401(k)
That's not to say that it's easy. Employer plans have some great features. They let you contribute substantial amounts of money without tax. They let your nest egg build tax-free throughout your lifetime, even if you buy and sell various investments over the years. If your employer is particularly nice, you might even get extra contributions, either from profit sharing or from matching contributions.

But even without a 401(k) plan, there are plenty of other ways to save. Here are just a few:

  • Roth IRAs. These unique accounts give you retirement income that's entirely tax-free. They're a great place to start, letting younger adults contribute up to $4,000 this year and $5,000 in 2008, with an extra $1,000 for those over 50.
  • Traditional IRAs. They're not tax-free, but they do give you a current tax deduction the same way that 401(k) contributions do. You'll also enjoy tax-deferred growth until you withdraw your money in retirement.
  • A plain-old regular brokerage or fund account. You might think that without any special tax features, regular accounts would be a lot less attractive than a 401(k). But in some cases, you'd be wrong.

Doing better without a 401(k)
Perhaps the most surprising thing about saving for retirement is that even though tax-favored accounts are important, sometimes you do better with just a plain-old regular account. That's because of the way the current tax laws treat retirement accounts.

If you invest in stocks for the long term, you already have a good deal when it comes to taxes. You pay tax when you receive dividends. But many stocks don't pay dividends at all, and most that do pay less than 3% per year. And as long as you hold onto your stock, you don't have to pay tax on your gains from rising share prices. What's more, you currently get preferential tax treatment both on dividends and on the eventual capital gains when you sell your stock. The maximum rate for both is 15%, well under the 35% top rate that applies to most income -- including distributions from 401(k) plans and traditional IRAs.

The chart below assumes that you invested $10,000 in several stocks 10 years ago and held them until now, and then shows what you'd have left after taxes if you sold them today and withdrew the proceeds, depending on which kind of account you used.


Current Value
of $10,000
Initial Investment

Net After Tax:

Net After Tax:
Regular Account






Berkshire Hathaway





Cisco Systems















Source: Yahoo Finance. Assumes taxpayer in 35% tax bracket and maximum 15% capital gains rate.

As you can see from the examples above, you may actually end up with more money by holding stocks in a taxable account than by owning them in a 401(k) or traditional IRA.

Best of both worlds
Of course, tax laws can change. That's part of what makes 401(k) plans and IRAs so useful -- you can plan your investments without worrying about the yearly adjustments to the way various types of income get taxed. Moreover, if you think a stock has gone as far as it will go, you can sell it and buy another without worrying about capital gains tax. So it definitely makes sense to use IRAs and regular accounts in tandem.

But if your employer doesn't give you a retirement plan to use, don't despair. By making the most of other savings options, you can still reach your goals and retire in style.

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For extensive advice on how to make your retirement dreams a reality, take a gander at the Fool's Rule Your Retirement newsletter. You'll find out how to navigate the tax laws to your best advantage, as well as how to save no matter what plans are available to you. Try it out free with a no-obligation 30-day trial.

Fool contributor Dan Caplinger has his own retirement plan now. He owns shares of Berkshire Hathaway. Amazon, Dell, and Berkshire Hathaway are Stock Advisor recommendations. Dell and Berkshire Hathaway are also Inside Value picks. The Motley Fool holds stock in Berkshire Hathaway. The Fool's disclosure policy works with any plan.