7 Alternative Ways to Save for Retirement That Aren't a 401(k)

If you are one of the millions of Americans without access to a 401(k) or similar employer-sponsored plan, saving for retirement may feel impossible.

It may seem like your options are limited to a low-interest account at the bank or tucking money under the mattress. Luckily, however, other good alternatives exist.

Here are seven great alternatives to a 401(k) that can help you prepare for retirement.

One of the most common ways to save for retirement outside of a 401(k) is through an individual retirement account (IRA). Anyone who has earned income in a given year can contribute to an IRA.

Parents can even open an IRA for their minor child if the child has a job and is earning money.

Two major types of IRAs — traditional and Roth — are available to most savers.

With a traditional IRA, contributions are tax-deductible in the year that you make them. The money grows tax-deferred until retirement. When you withdraw funds, they will be taxed as ordinary income at rates based on your tax bracket in the year of the withdrawal.

With a Roth IRA, you do not get a tax break during the year of the contribution. Instead, contributions are made with post-tax dollars and the funds grow tax-free. During retirement, withdrawals are tax-free.

You can open an IRA at any bank or financial institution that offers this product.

Freelancers, contractors, small-business owners, and gig-economy workers might consider saving for retirement via a simplified employee pension (SEP) IRA, more commonly known as a SEP-IRA.

This retirement plan allows you to contribute an amount equivalent to up to 25% of your wages. It offers tax benefits similar to those of traditional IRAs.

As with other IRA accounts, a SEP-IRA may be opened at any bank or qualifying financial institution that offers the product.

Another retirement savings option for self-employed folks is a solo 401(k) plan. But since that is indeed a 401(k), we did not feature it on this list.

Small business owners or self-employed individuals with fewer than 100 employees may want to consider a SIMPLE IRA. This plan is often easy to set up, and employees can contribute a portion of their salaries just like they would with a 401(k).

Employers who offer a SIMPLE IRA are required to either match a percentage of contributions or to make a nonelective contribution for eligible employees.

Although not typically thought of as a retirement savings vehicle, a health savings account (HSA) can offer great benefits during retirement for those who plan well.

An HSA offers triple tax benefits: Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free.

If you have a high-deductible health insurance plan, maxing out your HSA contributions can help you create a pool of money that you can use to meet future medical costs during retirement.

Once you enroll in Medicare, you cannot make new contributions to an HSA. However, you can still withdraw money that is already in the account to pay for medical expenses.

In addition, once you turn 65, you can use HSA funds for non-medical expenses without a penalty, although you would have to pay income taxes on these types of withdrawals.

Annuities can provide a guaranteed income stream during retirement, which makes them a popular financial savings instrument despite rules that are often complex.

An annuity is a contract with an insurance company in which you contribute a lump sum or series of payments in exchange for regular payouts for the rest of your life.

While annuities don’t come with the upfront tax benefits of a 401(k) plan, they can help insulate you from market volatility and provide peace of mind.

Investing in real estate — whether through rental properties, real estate investment trusts (REITs), or other methods — can offer steady earnings and potential investment appreciation.

Real estate investments can offer a regular stream of income and tax benefits, such as property depreciation. This type of investment can also offer a powerful way to diversify your retirement savings portfolio.

Finally, don’t overlook a standard brokerage account as a great place to save more for retirement. Investments in stocks in a brokerage account are taxed at capital gains rates if you hold them longer than one year.

Capital gains rates are much lower than ordinary income rates, and that makes investing in a brokerage account an often-overlooked place to build wealth for retirement.

It is estimated that 56 million private sector workers do not have access to a 401(k) or other employer-sponsored plan, according to research from the University of Pennsylvania.

Fortunately, there are still many other ways you can start saving now to build a secure retirement.

By adopting one or more of the alternatives on this list and working with a good financial planner, you may even be able to implement a savings strategy that helps you retire early.