With more than 70 million gig workers in the U.S., many people who earn a full-time income do not have access to an employer-sponsored 401(k) retirement plan. A 401(k), especially if your employer provides matching contributions, is a good way to save for retirement at any stage of life.

                By                    Dawn Allcot

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According to March 2021 statistics from the Department of Labor, 67% of private industry workers had access to retirement plans, which would include 401(k)s, in 2020. That number may have risen with the labor crunch and “Great Resignation” during the pandemic, when employers increased benefits packages, along with other strategies, to retain workers.

If you don’t have access to a 401(k), there are still many other ways to save for retirement.

Traditional IRA

If you are an independent contractor or your employer doesn’t offer a 401(k), an IRA (Individual Retirement Account) is often the next-best alternative. A traditional IRA may help reduce your tax liability if you choose to invest with pre-tax dollars.

You will not pay tax until you withdraw the money at age 72 (or sooner if you choose). There are no income limitations to opening a traditional IRA, which means no matter how much or how little you make, you can open an IRA and begin contributing immediately.

You should know that your maximum annual contribution for Traditional and Roth IRAs is limited to $6,000 if you’re under the age of 50 and $7,000 for those 50+.

Roth IRA

A Roth IRA is funded with post-tax dollars, which means you will pay taxes on your total income (minus allowable deductions) before your Roth IRA contributions. However, when you withdraw the money during retirement, you won’t pay taxes on it.

You can withdraw the deductions tax-free and penalty-free after the age of 59 ½, making a Roth IRA a great way to manage cash flow and minimize tax liability in retirement.

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A Roth IRA is also great for estate-planning, since your heirs can also withdraw funds tax-free.

Your account must be open for five years before you can withdraw funds. Your maximum contributions vary depending on your income. A financial advisor can help you determine your maximum contributions on your best course of action for saving for retirement.

SEP IRA

If you are self-employed or a gig worker, you can open a retirement account with your earnings. Options include a Solo 401(K) or a SEP IRA. With a SEP IRA (self-employed retirement account), you can contribute up to $66,000 in 2023, or 25% of your net self-employment earnings for the year.

Contributions are tax-deductible up to $305,000, but disbursements will be taxed in retirement.

Solo 401(k)

A Solo 401(k) is for self-employed or 1099 contractors. It offers the same tax advantages as a regular 401(k) as it can be funded with pre-tax dollars.

A Solo 401(k) allows contributions up to $61,000 per year, or up to $67,500 if you are age 50+.

Taxable Brokerage Account

For many people, investing in stocks is a viable part of their retirement plan. You can invest in stocks, ETFs, mutual funds and more through a brokerage account. Keep in mind that if you hold stocks and other investments in this type of account more than a year before selling, you may be subject to long-term capital gains tax. However, you can offset these taxes through a strategy called tax-loss harvesting.

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It’s important to note that investing in stocks and ETFs may be higher risk than investing in retirement accounts, which are well-diversified and poised for slow growth. You can make a lot in the stock market if you are prepared to weather the ups and downs of the market, diversify your portfolio and manage your risks.