Best Alternatives To A 401(k)

A 401(k) plan can be a great way to invest, giving employees the opportunity to grow their pre-tax contributions and earnings tax-deferred until they’re withdrawn in retirement. About 98 percent of employers with 401(k) plans make contributions, such as through a matching contribution, according to a survey by the Plan Sponsor Council of America.

Nearly 57 million people worked for employers that didn’t provide access to traditional pension plans or retirement plans, according to a 2024 study by AARP. To increase access, Congress passed the SECURE Act in 2019 to make it easier for businesses to offer 401(k) plans, opening them up to nearly 93 percent of employees.

If your current employer’s 401(k) does not have a match, offers limited investment options or has higher than average fees, it may make more sense to save for retirement on your own.

How to invest without a 401(k)

Fortunately, you do have some alternatives if your company does not offer a 401(k) plan — or a good one. For example, anyone with earned income can access an IRA and those with their own business — even a side gig —have alternatives, too.

If your employer’s retirement plan doesn’t measure up, here are eight investing alternatives to consider.

1. Traditional IRA

Best for: Gig workers or independent contractors in a high tax bracket, or workers without 401(k) access

A traditional IRA is one of the most popular ways a person can save for retirement, regardless of what other retirement plans they have. The traditional IRA allows a wage earner to put away money in an account that allows the money to grow tax-deferred. You’ll pay taxes only when you withdraw the money at retirement. Plus, you may be able to deduct contributions to the account from your taxable income, so you avoid taxes on that income today.

(Here’s everything you need to know about an IRA.)

2. Roth IRA

Best for: Gig workers or independent contractors or workers without 401(k) access in lower tax brackets

A Roth IRA is another way that workers can stash some cash for retirement, and it has two key differences from the traditional IRA:

• The Roth IRA allows you to grow your money tax-free, and you’ll be able to withdraw any of the money at retirement completely tax free. In exchange for this benefit, your contributions are made on an after-tax basis. In other words, you don’t get any tax savings today from the Roth IRA.
• A Roth IRA may be a better fit for you than a traditional IRA, but it depends on how your income and tax rate today compare to the one you’re expecting to have in retirement, so be sure to check with a financial advisor.

(Here’s how to open a Roth IRA.)

3. SEP IRA

Best for: Self-employed workers or business owners with high incomes

A Simplified Employee Pension IRA, or SEP, is an IRA for those who are self-employed, own a business, or have income from freelancing or side jobs. The SEP IRA has the same investment, distribution and rollover rules as a traditional IRA. A significant difference is that instead of the traditional IRA’s $7,000 limit (for those under age 50) on contributions, participants can contribute up to $70,000 in 2025 or 25 percent of eligible compensation, whichever is less.

4. Solo 401(k)

Best for: People with a one-person small business

You’ll need your own business to take advantage of the solo 401(k) and have no employees other than a spouse, but it’s a powerful savings vehicle if you have a side gig. You’re allowed to contribute as much as $70,000 for 2025, though that amount is divided into components for yourself as the employee ($23,500 for 2025) and yourself as the employer ($46,500). If you’re age 50 or over, your employee limit is $31,000 for 2025, making your potential total contribution as high as $77,500. And thanks to a new super catch-up for workers aged 60 to 63, people those ages can contribute up to $81,250 to a solo 401(k) in 2025.

One of the best perks of this type of plan, especially if you’re earning enough money in your main job, is the ability to save 100 percent of your business-generated income up to the annual maximum contribution limit of $23,500 (or $31,000 if age 50 or older). After that, you can contribute 25 percent of your business income up to the total employer contribution maximum ($46,500). That could be an important advantage over a SEP IRA, where your entire contribution is limited to 25 percent of your business earnings. Your contributions can be pre- or post-tax funds, depending on where the plan is overseen and the plan’s arrangement.

5. Health savings account

Best for: People who love tax breaks and want flexibility with their money in retirement

Health savings accounts (HSAs) aren’t just for health care, though they were created to help Americans with high-deductible health plans pay for their care.

HSAs offer a huge benefit for those who can accumulate a nest egg in their account until they retire and/or become covered by Medicare. You’re eligible for one if your employer-provided health insurance plan is considered a high deductible health plan and has a minimum deductible of $1,650 (individual coverage, $3,300 family coverage) and maximum out-of-pocket costs of $8,300 individual; $16,600 family). For 2025, the plan allows individuals to contribute up to $4,300 toward an HSA and families up to $8,550. Employees age 55 and older (by the end of the tax year) can contribute an additional $1,000 as a catch-up provision.

In exchange for contributing to your HSA, you’ll get a federal tax deduction today, and the interest or other earnings on the account are free of federal taxes. (However, some states tax contributions and earnings.) Distributions from the account are tax-free if you use the account to pay for qualified medical expenses. But the real benefit occurs once you hit age 65. That’s when you can avoid the 20 percent penalty for non-medical uses of the plan, although such withdrawals are considered taxable income. Even if your employer does not offer a HSA plan, you can set one up on your own.

The HSA has no minimum required distribution. In most plans, investment options are available for HSA contributions once a certain account balance is achieved. If you are still working after age 65, funds can be used to pay for employer-sponsored health insurance. After retirement, funds can be used to pay for Medicare or Medicare Advantage plan premiums.

6. Taxable brokerage account

Best for: People who may want to retire early and want unrestricted access to their money

If you’ve exhausted the other retirement savings options or they don’t apply, you can always save money in a taxable brokerage account. You won’t get any help from your employer here – no match, for example – but you can invest in what you want and you can choose the broker that works best for you. So, if you’re searching for low-cost brokers or you need to trade specific funds for free, you can do that.

(Here is Bankrate’s review of best brokers for beginners.)

7. Real estate

Best for: People who want to diversify and like the idea of owning property

With real estate, investors are responsible for making sound purchase decisions and growing their returns. Investments can be made for short-term cash flow or long-term appreciation purposes.

8. Invest in a business startup

Best for: People who can afford to take risks and aren’t scared to do so

The thrill of funding the next big thing makes investing in a startup exciting. However, it also includes a high degree of risk. Crowdfunding or focused investment platforms are a few ways that startups reach out to both potential investors and future customers.

How to choose the 401(k) alternative that’s right for you

The nice thing about saving for retirement is that you don’t have to choose just one account. If your 401(k) offers a match, it pays to contribute enough to collect that free money and then put your remaining retirement plan contributions elsewhere. 

In making your choice, think about:

• How much money you want to contribute toward retirement each year
• What investments you prefer
• What your tax bracket looks like now versus what you expect it to be in the future
• Your risk tolerance

Bottom line

The plans mentioned above were designed to encourage workers to play an active role in planning for retirement.

While having a company-sponsored 401(k) plan is great, workers have other options if their employer doesn’t offer this type of retirement plan, if they have additional money to invest from other employment or if they desire to utilize other investment vehicles that better fit their retirement goals.

— Bankrate’s Brian Baker and Maurie Backman contributed to updates of this story.