Your Company Doesn't Offer a Plan - Now What?
If your company doesn’t offer a retirement plan like a 401(k), you're not alone.
In fact, according to the U.S. Bureau of Labor Statistics, you're among 47% of all workers who don’t have access to a defined contribution plan.1
But if you're not doing something about it, you may find yourself on a lonely road. Don’t be left in the dust as your colleagues, friends and family ride off into the sunset when they retire.
Get a head start
If you're not putting money into some type of long-term investment vehicle, then you're risking your future. It will be hard for you to keep pace with your current standard of living in retirement if you don’t do something about it now. Keep in mind that investing involves market risk, including possible loss of principal.
Are you chomping at the bit to get started? The sooner you invest, the more opportunity your money has to work for you — and there are things you can do now to help make sure you have the money you need later.
Ask your employer to consider starting a matching program
Tell them how important the employer match is to you. If they're not convinced, find out how many other employees would like to have this important benefit.
If all else fails, remind your employer that a match may help attract new employees to your company as well as increase plan participation. In fact, according to the Center for Retirement Research at Boston College, “employees are more likely to join a plan and to contribute more when the employer offers a match.”2
Compare job offers
The next time you interview, carefully compare your job offers. Ask about all available benefits, including a retirement plan like a 401(k) and the employer match. Calculate the value, in dollars, of the potential employer match. If you're not offered one, consider negotiating a higher salary to make up for the loss.
Think about an IRA
There are two types of Individual Retirement Accounts (IRAs) you can consider in this case: a traditional IRA and a Roth IRA. Both have advantages and disadvantages.
With the traditional IRA, your contributions are tax-deductible now. Withdrawals are taxed as ordinary income and if taken prior to age 59½ they may be subject to a 10% penalty. You can contribute to a traditional IRA until age 70½ and there are no income limitations. Read more about the traditional IRA.
Having a Roth IRA means you'll have to pay taxes on contributions now and you won't be able to deduct these contributions — but any earnings grow tax-free. And with the Roth, there is no limit to how long you can contribute. Read more about the Roth IRA and other restrictions that may apply.
Next steps
Meet with an investment professional to determine whether one or more of the above options will help you meet your retirement needs. Don't have one? Learn how to choose an investment professional and find out what they can do for you.
Keep in mind that investing involves market risk, including possible loss of your principal.
1"National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2005." (Summary 05-01.) U.S. Department of Labor; U.S. Bureau of Labor Statistics, August 2005.
2" Suspending the Employer 401(k) Match: How Big a Deal?" Center for Retirement Research at Boston College, June 2003.
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