Job without 401K

[Dalton]

I only had a 401k at one of my jobs, and only worked there for 3 years before the housing bubble burst and took my job. I retired early, and am honestly quite pleased that I have a tIRA and a sizeable taxable brokerage account to go with a very low cost of living. My income taxes on taking money from the brokerage are at Roth levels so far, though I similarly paid tax on the basis when I earned it (same as Roth). If I find something to spend more money on, I guess Ill be in the 15% bracket.


For OP, if you're not planning to work at this new company for a long time, you could just consider that you're building up those bridge funds for when you retire early.

 

[livingalmostlarge]

pretty common in startups to not have 401k. Too expensive for say 8 employees. But if you work for a startup i'm sure you know that you are also being paid less too. Mostly you are there for experience and gambling on the stock going exponential. Looking to 100x your options or something.

 

[BeWealthy]

I worked for 11 years at a small company without a 401k. I chose to invest part of my salary in tax efficient ETFs in a taxable account. I am now grateful that I have abundant accessible funds since leaving the workforce at age 53. I know some who have retired earlier than expected and have lamented an over-allocation to tax deferred accounts. YMMV.

 

[disneysteve]

I didn’t get a 401k until I took my current job in 2016. For the 23 years before that I didn’t have one so we maxed out IRAs and Roths once those came along and accumulated a lot in taxable accounts. I retire next month a couple of months shy of turning 60.

You work with what you’ve got.

 

[Maxburn]

I have one of those jobs for about ten years now. I'd like to hear ideas on what else I can do about it on my end. I don't generally need health savings unless that can be carried somehow year to year and used in a decade maybe??

My company is small ~55 people and they didn't want to deal with all the things a 401k requires, they looked into it and front office said no way. It bothers me because I'd really like to dump a lot more pre tax money in to invest.

BUT in my case part of the compensation package is a good chunk of change dumped into a IRA in my name. My only gripe with it is they exclusively do it with Edward Jones and the only funds they have available are poor performers with high expense ratios. So now every year I tell EJ to put me in a cash position and I'll sweep it out to Vanguard IRA.

I also max out my Roth every year, usually before April. This year was a bit of a stretch, I just did my last contribution last week as the limit went up to $8000.

All of the rest of my savings just gets dumped into a money market fund. I technically have a savings account I never use.

 

[swabby01]

My wife and my 401K’s were over half of our “retirement” funds and allowed both of us to pick the date we chose to retire. Maybe should have channeled additional funds into Roth but that would have been for kids after we passed away anyway. The were “Priceless” to us

 

[target2019]

Depends on timing?

If you are 10 years away, and need the tax deferred growth, then yes.

If you are just a few years away, you may be bettered served by growing tax free and taxable.

 

[Badger]

BUT in my case part of the compensation package is a good chunk of change dumped into a IRA in my name. My only gripe with it is they exclusively do it with Edward Jones and the only funds they have available are poor performers with high expense ratios. So now every year I tell EJ to put me in a cash position and I'll sweep it out to Vanguard IRA.

I also max out my Roth every year, usually before April. This year was a bit of a stretch, I just did my last contribution last week as the limit went up to $8000.

All of the rest of my savings just gets dumped into a money market fund. I technically have a savings account I never use.

 

[jazz4cash]

. I don't generally need health savings unless that can be carried somehow year to year and used in a decade maybe??

I don’t have one but isn’t that how HSA’s work?

 

[Maxburn]

I don’t have one but isn’t that how HSA’s work?

I need to look into that, last one I was aware of was a use it or lose it situation.

 

[rmcelwee]

I need to look into that, last one I was aware of was a use it or lose it situation.

We just claimed HSA money for medical expenses that were 15 years old. You do not lose it.

 

[rmcelwee]

Most searches of "company without 401K" tell you that you can contribute to an IRA/or trading account or HSA if available...but this all seems to pale in comparison to a 401K.

I'm a little late with my reply, but this could be a hidden benefit. I'm in the camp that wishes they didn't put so much into their 401K. I'd much rather have my money in a Roth, HSA, and brokerage accts. There are many tax benefits with these other accts that you don't get with a 401K. I w*rked with several people who ONLY had a 401K and they are really missing out now that they have FIRE.

 

[Maxburn]

We just claimed HSA money for medical expenses that were 15 years old. You do not lose it.

I got the answer back and we do not have a HSA: our internal accounts looked into it and the work necessary for a HSA look similar to a 401K and they can't handle it.

So if you in a small company that doesn't have a 401K you probably won't get a HSA for the same reason.

 

[rmcelwee]

I got the answer back and we do not have a HSA: our internal accounts looked into it and the work necessary for a HSA look similar to a 401K and they can't handle it.

So if you in a small company that doesn't have a 401K you probably won't get a HSA for the same reason.

HSA does not have to come through your j*b. In fact, I opted out of the one my company offered and transferred all the money to another one. I also dropped a $7500 lump sum in one even after I FIRED. It has absolutely nothing to do with them. You could drop $8300+ in one today if you wanted.

 

[Maxburn]

HSA does not have to come through your j*b. In fact, I opted out of the one my company offered and transferred all the money to another one. I also dropped a $7500 lump sum in one even after I FIRED. It has absolutely nothing to do with them. You could drop $8300+ in one today if you wanted.

Oh, interesting. I guess I need to look into this myself. Thanks.

 

[Aerides]

I have one of those jobs for about ten years now. I'd like to hear ideas on what else I can do about it on my end. I don't generally need health savings unless that can be carried somehow year to year and used in a decade maybe??

HSA funds do not expire. And your assessments of what you spend on healthcare while you are working will be blown away later in life. Even if you are healthy. Test show up wonky, hips start to ache, knees get blown out....if that's all you have before 70 you are lucky!
And, generally deductibles are higher, so you'll have decent out of pocket for lots of things. Dental, eyeglasses, not covered by insurance, are HSA eligible.
I finally spent down my employer HSA 8 years after retiring, but I have a new one I opened with FIDO and continue to contribute to it, as I have an HSA-eligible ACA plan, and it provides continued tax breaks by contributing.

(FSA accounts expire each year, very different animal.)

 

[Lorenzo]

Someone educate me on all the love for HSAs I see. As far as spending on healthcare is concerned, all an HSA saves me is the tax, right? So I put some pre-tax money into my HSA and use it to pay my out-of-pocket healthcare costs instead of using my after-tax money. For that to feel significant to me, my out-of-pocket healthcare costs would have to be, I dunno, in the tens of thousands of dollars. Maybe for some older folks, they do have that level of out-of-pocket healthcare expense?

Now, if one has so much money that they have maxed out their other tax-deferred investment accounts and are using the HSA as yet another one, so they might someday spend it on non-healthcare expenses, I suppose that's another benefit. The problem, at least with my HSA plan, is I don't have the option of choosing an investment portfolio; I'm not sure, but I think it simply earns interest, and at not a great rate. They say that once I turn 65 I can spend my HSA on "anything I want," but at least with my plan it seems I would be better off investing in something with a better return.

 

[CRLLS]

The way I understand it, I consider an HSA to be a blend between an IRA and Roth IRA.

Contributions are made with pretax (or tax deductible) dollars, eliminating any income taxes at the time of contributions. When used for medical payments, the money is not taxed upon withdrawal/payment. Once you reach age 65, then a withdrawal for any reason can be made with untaxed money. According to Fidelity, self-directed HSA investments can be made in stocks, bonds, ETFs, mutual funds, and more. What a great plan they are, especially if you are or will be in the higher tax brackets.

The downside is that HSA contributions are only allowed for those with high deductible health plans.

HSA's were just getting started when I left the workforce and I never participated.

 

[Maxburn]

So HSA has some requirements. I don't entirely know how to figure out if my current plan through work qualifies for HDHP?

Minimum deductible for an individual 2023 was

$1,500

When Is an HDHP HSA-Qualified?​

As the name implies, your insurance plan must meet certain deductible requirements to qualify for an HSA. However, it’s not the only qualification. Your HDHP:

• must comply with all IRS deductible and out-of-pocket limit requirements.
• can’t cover any expenses other than preventive care (such as annual checkups, regular screenings and immunizations) before you meet your deductible (there are certain exceptions).
• can’t be paired with an HRA, which is another type of employer-funded and -owned account that reimburses employees for qualified medical expenses.2

 

[Lorenzo]

So HSA has some requirements. I don't entirely know how to figure out if my current plan through work qualifies for HDHP?
. . .

The HDHPs I have been enrolled in through various employers all came with an HSA attached; it wasn't an option that I had to proactively pursue. Can't you call the plan administrator and simply ask if it qualifies?

 

[Maxburn]

The HDHPs I have been enrolled in through various employers all came with an HSA attached; it wasn't an option that I had to proactively pursue. Can't you call the plan administrator and simply ask if it qualifies?

Final answer just now from the plan administrator; we have Co-Pay in our health plan and that specifically excludes us from a Health Savings Account (HSA). It's frankly a great health plan, better than most businesses offer these days so I'm not supprised it doesn't qualify. I guess the bottom line for those reading this, if you have a High Deductible Health Plan (HDHP) you really need to look into a HSA if you aren't already in one. If you have a HSA you should look into putting more money in as a "benefit" of having a not great health plan.

For a while they were looking at a Flex Spending Account (FSA) which seems similar but that's the use it or lose it pre tax contribution vehicle. Apparently there is a small rollover ~$500 available for it but not something you can dump tens of thousands in to insulate you against costs in retirement.

A Health Reimbursement Arrangement (HRA) was also considered where we worked, but again with the level of health plan we have selected here it also wasn't a good fit.