No 401(k)? Consider an IRA

This guest blog post from Honest Dollar by Goldman Sachs details the options you have to save for later in life

By: Honest Dollar by Goldman Sachs

If you are an independent contractor or work for a company that doesn’t offer a 401(k), there are other attractive options to save for later in life. A Traditional, Roth or SEP Individual Retirement Account (IRA) could be a good fit.


Investing in an IRA can be easy

An IRA is a retirement account you can sign up for yourself, so you aren’t limited to what an employer offers. You can find some IRA offerings in the marketplace which require only a small, or even no, minimum contribution to open an account. If you want to invest in financial markets, you can do that without having to select individual securities such as stocks and bonds yourself. It’s possible to get a broadly diversified portfolio by making a single investment selection, such as by investing in a professionally managed account or a target-date mutual fund that spreads your money across stock and bond markets.


It’s generally best to start saving for retirement while it’s on your mind and whenever you’re financially able, even if you start small. The younger you are, the more years you’ll have for the power of compounding to potentially help your account grow. For 2018, the maximum contribution to a Traditional or Roth IRA is $5,500 if you are younger than 50 or $6,500 if you will be 50 or older at year-end. If you have self-employment income, you may be eligible to make an even larger contribution to a SEP IRA. For SEPs, see IRS Publication 560, including the section on the Deduction Limit for Self-Employed Individuals.


You may get a tax benefit too

IRAs have potential tax benefits that can make them attractive for building a nest egg for retirement.


With a Traditional or SEP IRA, your contributions may be tax-deductible today, potentially saving you money on your taxes. Your money can grow tax-deferred until withdrawn in retirement.  Learn more about who can deduct a Traditional IRA contribution here.


With a Roth IRA, you contribute after-tax dollars today, and your withdrawals in retirement are tax-free. You are eligible to contribute to a Roth if your income is below certain levels.


Understand the rules about withdrawals

The tax laws include rules about when you withdraw money. Since IRAs are designed specifically for retirement saving, withdrawals before age 59½ may be subject to a 10% IRS penalty in addition to any tax you may owe. You can read about IRA distribution rules in IRS Publication 590 – B.


Because of the early withdrawal penalties that may apply, you should avoid contributing money to an IRA that you need for ordinary living expenses and short-term financial obligations. You should also set money aside in an emergency fund for unexpected expenses to avoid having to dip into your IRA before retirement.


You can start saving today with Honest Dollar

At Honest Dollar by Goldman SachsTM, individuals can open an IRA in minutes and contribute on a flexible schedule. We offer diversified portfolios designed by Goldman Sachs Investment Strategy Group.






Goldman Sachs & Co. LLC (“GS&Co.”) does not provide accounting, tax or legal advice. Nothing communicated to you on this website should be considered tax advice. You should consult an independent tax professional regarding your personal circumstances. This material is provided solely on the basis that it is educational only and will not constitute investment advice. GS&Co. is not a fiduciary with respect to any person or plan by reason of providing the material or content herein.