How to save for retirement without 401K

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uclalee
Posts: 98
Joined: Tue Apr 12, 2016 3:07 pm

How to save for retirement without 401K

Post by uclalee »

Hi Bogleheads,

I currently work in a job that offers a 401K with 3% max. I have been maxing this out, as well as doing backdoor roths for both myself and my wife. I am considering changing jobs, but the new job does not let me contribute to the 401k plan for 1-2 years. Any suggestions on how to continue contributing to retirement in tax deferred spaces without messing up the backdoor roth?

My initial thoughts are to contribute the max pre-tax to a traditional IRA over the first six months of the year, then roll the IRA funds into a solo 401K such as Fidelity. Then at the end of the year when the balance on the traditional IRA is zero, contribute post tax money to traditional IRA and convert to roth IRA shortly thereafter. Would this work, or would this still violate the pro-rata rule?
livesoft
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Re: How to save for retirement without 401K

Post by livesoft »

Negotiate a signing bonus to cover the lack of 401(k) in those years.

Invest tax-efficiently in a taxable account for retirement.

Unless you have income from self-employment, I don't see a solo401(k) in your future.
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retiredjg
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Re: How to save for retirement without 401K

Post by retiredjg »

I think I recall that 1 year is as long as the law allows them to make you wait. Are you sure they said up to 2 years? Edit: apparently if you are under 21 years old, they can make you wait longer.

Your Solo 401k plan will only work if you have income from a side business and if it is worth it to you to pay the Solo 401k fees.

You can still save money - in a taxable account (use only tax-efficient index funds) and in a tIRA. The tIRA money might interfere with back door roth for a year, but it could then be rolled into your new 401k.

Your plan doesn't really work because you don't get to contribute $5,500 twice. That $5,500 is the total of deductible and non-deductible and Roth contributions for the year.

You could pay extra on debt for a year instead of saving for retirement.

Your year wait is disappointing, but it is not fatal. If you have nothing better to do, just save money for your next car or other large purchase that you will be making some day anyway.
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Aptenodytes
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Re: How to save for retirement without 401K

Post by Aptenodytes »

If you envision potentially paying for children's college tuition out of pocket (as opposed to relying on financial aid) somewhere down the line, you could put money into a 529 account, designating yourself as the beneficiary for the time being (I'm assuming you have no children yet). The contributions are not tax deductible, but the earnings will be (provided you eventually spend the money on education).

Such a move is not directly a retirement-savings action, but indirectly it will increase your retirement savings by letting you divert less retirement money towards college tuition down the line.
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whaleknives
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Re: How to save for retirement without 401K

Post by whaleknives »

uclalee wrote:. . . My initial thoughts are to contribute the max pre-tax to a traditional IRA over the first six months of the year. . .
Two IRA's, one for you and your wife.
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retiredjg
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Re: How to save for retirement without 401K

Post by retiredjg »

YOu can use a Health Savings Account (HSA) if you have a High Deductible health plan.

You didn't mention if your wife has a 401k/403b.
Topic Author
uclalee
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Joined: Tue Apr 12, 2016 3:07 pm

Re: How to save for retirement without 401K

Post by uclalee »

I didn't realize the contribution limit to an IRA was for both deductible and non deductible. So my first plan won't work. I do have children, so maybe I'll use the money to start a 529 or pay down student loans instead. Thanks for the suggestions.
retiredjg
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Re: How to save for retirement without 401K

Post by retiredjg »

There's rarely a wrong time to pay off debt. :D
ks289
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Re: How to save for retirement without 401K

Post by ks289 »

Max out 2016 401k before leaving current job.
If waiting 1 year max out 2017 401k in the latter half of 2017.

If waiting 2 years you'll need to use the other options for 2017.
Topic Author
uclalee
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Joined: Tue Apr 12, 2016 3:07 pm

Re: How to save for retirement without 401K

Post by uclalee »

ks289 wrote:Max out 2016 401k before leaving current job.
If waiting 1 year max out 2017 401k in the latter half of 2017.

If waiting 2 years you'll need to use the other options for 2017.
Is it true that after your income surpassed $260,000 you can no longer contribute to 401k, regardless of whether or not you've reached the max contribution?
ks289
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Re: How to save for retirement without 401K

Post by ks289 »

uclalee wrote:
ks289 wrote:Max out 2016 401k before leaving current job.
If waiting 1 year max out 2017 401k in the latter half of 2017.

If waiting 2 years you'll need to use the other options for 2017.
Is it true that after your income surpassed $260,000 you can no longer contribute to 401k, regardless of whether or not you've reached the max contribution?
No.
But, if your plan is top heavy (do not know the precise definition, but essentially highly compensated employees contribute on average more than non highly compensated employees), then there may be limitations which do not allow for maxing 401k.
Our plan avoids this situation by offering a safe harbor plan.

The $260,000 (now $265,000) income limit does apply to income which can be considered for employer matching contributions.
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