What To Do If Your Job Doesn't Offer a 401(k)

Posted by Shaun Morgan in RetirementNovember 29, 2021(Last Updated July 25, 2022)5 min read
Key Takeaways
  • There are a lot of reasons someone might not have access to a 401(k), so don't be alarmed if you don't have one.
  • If you don't have access to a 401(k) there are other investment options including a 403(b), 457(b), IRA, HSA, and more.
  • Sometimes you need to self-advocate to get the benefits you need, such as asking your employer to open a 401(k) plan.
Are you ready to make some real money moves?

You're about to take your first job, and your employer hands you a welcome packet. As you're looking through that packet, you realize that there are no retirement benefits offers. You ask your boss, "Where is my 401(k)?" Your boss responds that they don't offer one. So should you reject the job offer? Probably not. 


While not having a 401(k) plan is a potential problem, in most cases, it is not grounds to reject a job outright. There are many reasons a position might not include a 401(k). 


The first step is to determine why no 401(k) is being offered as a benefit option. 


Reasons Why a 401k May Not Be Offered 


There are four main reasons that an employer might not have a 401(k) plan. 


1) You are a non-profit or government employee. 401(k) plans, as defined in the Internal Revenue Service (IRS) code, is for private employers and employees. So, if you are employed by the government in any fashion, you are not offered a 401(k) plan. Instead, you are offered a 403(b) plan and a 457(b) plan, which have a lot of benefits and are very similar to a 401(k) plan. So, the different plans are pretty indistinguishable. Just keep in mind that there are slightly different rules for a 401(k) and the 403(b) or 457(b). Therefore, when doing your research, make sure to research the specific plan you have access. 


2) Part-time employee. Another reason you might not have a 401(k) offered is that you're a part-time employee. It is not that part-time employees aren't eligible to contribute to a 401(k). They are just often overlooked. If you work part-time and want to contribute to a 401(k), you might need to start advocating for yourself and asking your employers for a 401(k). 


3) Independent contractor. Independent contractors are a weird mix between employees and being self-employed. If you are an independent contractor, you must remember that you are not an employee. 


So how do you tell if you're an independent contractor? Employees receive a W-2 at tax time, but independent contractors receive a 1099. Another way to tell is that when you're hired as an employee, you'll fill out a W-4 while independent contractors fill out a W-9. 


Why does this matter? Well, employees have a special relationship with their employer. The employer is required to do many things for their full-time employees, including paying FICA taxes on their behalf, offering healthcare plans, etc. In particular, one thing that an employer often offers is access to a 401(k). However, since independent contractors are not technically employed by the employer, you will not be offered a 401(k) plan. 


4) Small business owner didn't set it up. The last and biggest reason you might not have a 401(k) plan is that your employer never set one up. After all, setting up a 401(k) is expensive for an employer. They have to pay fees to a custodian who holds the plan, and it is generally expected that an employer will then offer a contribution match to their employees. 


These fees and expenses can quickly add up for an employer, especially a small business with very few employees. If you're employed by a local business owner, it is very likely that they haven't set up a 401(k) plan because of the fees associated with doing so. 


Image Credit: PXhere.com


Investment Solutions If Your Job Doesn't Offer a 401(k) Plan 


There are a lot of retirement investment vehicles besides a 401(k) plan. So, if your job doesn’t offer a 401(k), you can consider these options. 


Individual Retirement Account (IRA). An IRA is available to anyone who is earning income and simple to start. You go to a retirement account company and ask them to open an IRA for you, and that's it. 

The IRA has the same tax advantages as a 401(k), and there is a ROTH option just like your 401(k), so they are essentially the same. The two main differences is that you can contribute less to an IRA and there is no employer sponsoring your IRA. 


This is the easiest solution to not having a 401(k). However, it is worth noting that you can contribute to both a 401(k) and an IRA. Therefore, the IRA doesn't replace the 401(k). 


403(b) and Potential 457(b) Options. If you are a government or non-profit employee, look into your 403(b) and potential 457(b) options. There are a lot of nuanced differences about these accounts, but for our purposes here, they are essentially the same as a 401(k). 


If you have a 403(b) or 457(b) then don’t sweat it, you basically have a 401(k). 


Health Savings Account (HSA). This might sound odd, but if your employer offers an HSA, that might be the best retirement investment vehicle you have, even without a 401(k). 


The HSA is meant to allow you to pay for medical expenses with tax dollars. In practice, you can put money in (tax free), invest it and let it grow (tax free), and then pull your money out for medical expenses, or once you reach retirement age, completely tax free! 


This shouldn’t replace the 401(k) per se because the contribution limit is quite low. However, it is another great option that is available to a lot of people. Just make sure you follow the rules for opening an HSA because there are a lot of rules associated with this option. 


SEP IRA or Solo 401(k). If you're self-employed or are an independent contractor, you can look into the SEP IRA or Solo 401(k). The plan allows you to act as your employer and the employee to increase your overall contributions. 


These options are not available to people who only have a W-2, so keep that in mind. 


How to Get a 401(k) If Your Job Doesn’t Offer One 


If you are adamant about getting a 401(k) at your job, there are two options to consider. 


Option 1. Ask your employer to offer one. As mentioned before, sometimes small businesses just haven’t taken the time or the money to create a 401(k) plan. However, if you just ask, they might be willing to do it. 

No one is going to fire you for asking about a 401(k). The worst they can do is say no, in which case you still have the options listed above. 


Option 2. Find a new employer. I know that isn’t always easy, but if your employer isn’t offering the benefits and compensation that you deserve for contributing your time and talents to the company, then maybe you need to go elsewhere. 


The 401(k) is the most common retirement plan, but it definitely isn’t the only option. If you don’t have access to a 401(k), remember that you have other options to save for retirement. Regardless of which option you choose, investing for retirement is possible for you.


Which investment option is best for you? Share you comments below.

Main Image Credit: PXhere.com

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