Getting comfortable with no 401k if you've always had one

[Pilsy]

Have you ever moved from an org that offers a 401k to one that doesn't? If so, did you struggle with that decision? Which adjustments did you make in your savings strategies? I asked my financial advisor, and we discussed the obvious: IRA, HSA, taxable funds. I'm not eligible for a Roth. 


I'm anticipating a job offer, and I'm excited about the opportunity, but I'm having trouble getting past the lack of a 401k - even once I adjust the numbers to account for it. It's a very small org, and I'm comfortable with its solvency, so that's not my point/focus, but there's something about a traditional 401k that's so meaningful to me. Ugh! I feel like a kid being asked to surrender her security blanket.  


I don't know what I'm looking for. I guess I just need to struggle "out loud."

[Susie]

Do they offer any kind of retirement savings plan? Our firm offers a 401k now, but when I started they had a SIMPLE IRA. The contribution limits were lower, which is a bummer, but better than nothing.

[Pilsy]

No, I don't believe they do. I will get clarification, of course, but I believe it's a missing piece right now despite being something they plan to put in place. They offer nice medical/dental benefits and decent/generous PTO, and they are thriving/growing, but they are still very small. I think I need to ask the recruiter what the formal timeline is for getting something in place. I'd feel a lot better if I knew it were a priority and going to be in place within a year or whatever.

[Pom]

Oh yes. We had a bit of a meltdown about that at Mr. Pom’s last job and now this one too. We did a back door Roth and put extra $$ in regular investments. He is now in a “coast” job as we are planning to have Mr. P retire at 58 so we will need some cash to run until retirement withdrawals begin. It was just a matter of continuing to save without employer share which felt disappointing.

[imojoebunny]

This is just an idea to consider. When I quit working, we had a couple of rental properties, and we have kept them to augment my lack of 401K. I know staying at home isn't the same, as a job without a 401K, but it is an option to consider, if you can manage it yourself. It essentially grows tax free, since you do not pay capital gains, until you sell. We didn't make much, if anything, on a cash flow basis, in the beginning, but overtime, our initial small investment (down payment on the 1st one), has become worth well over a million dollars. Being a landlord isn't for the weak of heart or the I would rather go to brunch on Saturday (not that we didn't do that, but some Saturdays were work days), but it can be a great thing for some people. We like our tenants, and have had many of them for years. We have duplexes, so we lived in them, fixed them up, then rented the fixed up units, which allowed us to get conventional loans initial, as they were our primary residence. We have had them for over 20 years, and been lucky, that they have gone from prostitutes and dealers on the corner to highly desirable locations, so it isn't without risk or luck, but housing will continue to be a need in many areas, so it is a good diversification bet, but you need to be financially stable enough to weather downturns. Saving outside of retirement vehicles can be a good option, too, as Pom mentions, especially, if you plan to retire or downsize your position, earlier than retirement vehicles will allow you to withdraw. I know two teachers who bought a triplex and the cash flow allows them to send their daughter to private school, and travel in the summers (they have a regular bungalow, with two rental units on the property, not attached to their house). It isn't always about retirement, but it can be an option.

[RockNVoll]

Sept 9, 2021 14:02:11 GMT -5 spearmintleaf said:

I recently became self-employed. I will say, forcing myself to save post tax isn’t as easy as an automated 401k/403b was. I’m worried that I won’t do as well with it, although I think that’s irrational and I have enough self discipline to make it happen. Obviously I didn’t let it stop me, but I feel your pain!

Have you looked into a SEP IRA?  It's even better than a 401(k) because in many cases your contribution maximums are far higher and your investment options broader.  As a self-employed individual, you would qualify to open one.

[chpmnk1015]

my husband went from a 401k to working for himself. So, he started doing a roth every year and i upped my 401k a bit to compensate as well. we need to start doing other savings for him as well

[ellipses84]

It was a consideration that made me nervous when I switched to self employment. Shortly after that, an old firm offered me a part-time gig, and one of the only benefits I get as a part-time employee is access to a 401k with a match. I agree it’s like a security blanket and a big factor why I took the part time job. I have a high % set so I’m not contributing in other ways at the moment. My last firm had ESOP and Profit Sharing so 401k wasn’t the primary retirement vehicle. I also have rollover IRAs, etc. I can aggregate all the retirement accounts in Mint and see the overall growth so it doesn’t really matter what type of accounts they are.

Cons to not having a 401k are the self-discipline required, the lack of a match and the taxable income reduction. A lot of people contribute a lump sum to an IRA at the end of the year, but I recommend you set it to automatically come out of each paycheck. Whether that goes to a separate savings account, is an automatic transfer from your checking the day after your paycheck is deposited, or automatic transfer from employer to a retirement account is up to you (but you’ll earn more if you don’t wait until year end).

[jinkies]

I hadn't had a match on my retirement accounts for several years (#nonprofitlife) prior to me quitting to work for myself. So it didn't seem like as big of a deal to me.

I would account for the employer match at your current job when you are comparing your current salary to potential future one.

Then I would just try to automate putting a set amount from each paycheck into whatever savings vehicle you want to use in lieu of the 401k.

I personally just do a lump sum at the end of the year when I do my taxes, but that's probably not the best approach.

[Pilsy]

Thank you all. I definitely have the discipline to just put money aside with each paycheck, so that helps. I hate losing the match, but the base increase is really good, even after I adjust for that.

I'm glad I'm not alone in being a little fixated on it!

imojoebunny, that's not a bad idea!

[sicilygirl]

My husband was recently in this situation when he took a new job in March. He was leaving his old job right after receiving his bonus for the previous calendar year. He asked HR at his old company to max out his 401k contribution when his bonus was being paid out, so that he was able to make his normal contribution for 2021 (just front-loaded).

He also asked the new job if they would consider adding a 401(k) in the future, and they said that he could take that project on, which he has. It’s also a small company (about 20 employees), and several others are excited this benefit is being added in 2022. I don’t think there’s going to be a match, but at least he will be able to make his own contributions.

Clearly these strategies won’t work for everyone, but just some additional ideas to float around.

If you happen to have any self-employment income from a side job or consulting, make sure to max out the SEP IRA benefit there as well.

[Pilsy]

Sept 14, 2021 13:21:10 GMT -5 sicilygirl said:

He also asked the new job if they would consider adding a 401(k) in the future, and they said that he could take that project on, which he has. It’s also a small company (about 20 employees), and several others are excited this benefit is being added in 2022. I don’t think there’s going to be a match, but at least he will be able to make his own contributions.

This is cool! I'm going to bring this up, too. I don't know how pricey it is for an org to offer one (without a match), but it's worth asking about. Thanks for mentioning this, and good for your husband! I like that initiative. 

[gt7301b]

I've always had a 401k or equivalent, but  as long as the compensation is adequate I wouldn't be that bothered by not having one as an option.  

Even if I wasn't eligible for a Roth I would do a back door Roth and invest the rest in an S&P index fund.  As long as you are disciplined to invest you will be fine.

[WinterWine]

I haven’t posted in a long time but saw this thread. My husband and I purchased a small business that did not have a 401k. I went through establishing one so our team would have that benefit (we are small- 10 employees). I went through Vanguard small business to do so. It was very easy, and costs me little on an annual basis (I believe in the $2-5k range). It took a few months to setup. Definitely worth exploring if the new employer is open to it.

[Pilsy]

WinterWine, thanks! That was so smart of you; it matters to employees.

I learned it's a work in progress, so while I don't know if there will be a match, at least access to the savings vehicle is forthcoming! It's such a relief.