Are 401(k) Plans Only Available Through Employers? – Avoid This Mistake + FAQs

Many Americans are surprised to learn that 401(k) plans are generally only available through employers. In fact, about 56.6% of U.S. workers have access to a 401(k)-type retirement plan at work, leaving roughly 4 in 10 without one.

If your job doesn’t offer a 401(k), it can feel like you’re missing out on a key retirement tool. But don’t worry – there are alternative ways to save for retirement and recent laws are expanding access.

In this article, you’ll learn:

• What federal law says about 401(k) plans and why they’re tied to employers – including the definition of a 401(k) and how it works under U.S. law.
• Whether you can get a 401(k) without an employer – covering special cases like self-employed Solo 401(k) plans and why individuals generally can’t open a 401(k) on their own.
• Options if your employer doesn’t offer a 401(k) – from Individual Retirement Accounts (IRAs) to new state-sponsored retirement programs for workers without workplace plans.
• Key differences between 401(k)s and other retirement accounts – contribution limits, tax benefits, employer matching, investment choices, and more (with comparisons, tables, pros and cons).
• Common mistakes to avoid – pitfalls like not taking advantage of alternatives, misunderstanding plan rules, or missing out on free employer matching money.

Understanding 401(k) Plans Under Federal Law 🏛️

A 401(k) is, by definition, an employer-sponsored retirement plan. The term “401(k)” comes from Section 401(k) of the U.S. Internal Revenue Code, which created this type of retirement savings arrangement in the late 1970s.

Under federal law, a 401(k) plan is a qualified retirement plan set up by an employer, allowing eligible employees to contribute a portion of their wages to individual accounts.

In other words, only an employer (or self-employed business owner) can establish a 401(k) plan – it’s not an account you can open on your own at a bank or brokerage like you would an IRA.

How a 401(k) works: In a traditional 401(k) arrangement, the employer acts as the plan sponsor and sets the plan’s terms, often hiring a financial company to administer investments. Employees choose to defer part of their paycheck into the plan (this is the “cash or deferred arrangement” in IRS terms).

Those contributions go into the employee’s personal 401(k) account, usually before taxes (for a traditional 401(k)), which means the money isn’t counted as taxable income that year. Employers may also contribute by offering a matching contribution or profit-sharing contribution.

For example, a company might match 50% of the first 6% of salary an employee contributes – effectively free money that boosts the employee’s savings. Many employers offer matching contributions to encourage workers to save, although matching is not required by law (each company decides if and how much to match).

Federal laws like the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) set the standards for 401(k) plans nationwide. Some important points include:

• Eligibility and Participation: Employers can set eligibility requirements (such as needing to work for 6 or 12 months, or be at least 21 years old) but federal law limits how restrictive they can be. For instance, after recent updates in the SECURE Act, long-term part-time employees must be allowed to participate once they’ve met certain tenure criteria – a change aimed at expanding access to more workers.

• Tax Benefits: Contributions employees make to a traditional 401(k) are tax-deferred – meaning you don’t pay income tax on those contributions (or on investment earnings) until you withdraw the money in retirement. This tax break is a big incentive. Some plans also offer a Roth 401(k) option, where contributions are made after-tax but withdrawals in retirement are tax-free, similar to a Roth IRA. Either way, the plan must follow IRS rules to maintain its tax-advantaged status.

• Contribution Limits: The IRS sets annual limits on how much an individual can contribute to a 401(k). These limits are much higher than those for IRAs, which is one reason 401(k)s are coveted. For example, in 2024 an employee can contribute up to $23,000 to a 401(k) (or even more if age 50+, with an extra $7,500 catch-up). By contrast, the IRA contribution limit for 2024 is $7,000 (with a $1,000 catch-up if 50+). Employers can also contribute to your 401(k) via matches or profit-sharing, and there’s an overall limit (for 2024, the total of employee+employer contributions can’t exceed $69,000 for most participants). These high limits mean you can potentially save a lot more each year in a 401(k) than in an IRA.

• Investment Options: In a 401(k), your investment choices are determined by the plan. Typically, the employer (through the plan provider) offers a menu of mutual funds or similar investment options. You usually get to pick from maybe a few dozen funds (stock funds, bond funds, target-date funds, etc.). This means 401(k)s often have more limited investment options than IRAs do, though those options are often curated for diversification and low fees. With an IRA that you open yourself, you generally can invest in a wide range of stocks, bonds, ETFs, or funds – almost anything. In a 401(k), you’re somewhat restricted to the plan’s lineup, though those options are typically vetted for quality. The trade-off is convenience: the plan handles the logistics, and you just choose from the list.

• Employer Oversight and Fiduciary Duty: Because 401(k) plans are employer-sponsored, the employer (and plan administrators) have legal responsibilities. They must manage the plan in the best interest of participants, follow ERISA fiduciary standards, and not discriminate in favor of highly-paid employees. This is why plans have complex testing or safe harbor rules to ensure, for example, that top executives aren’t contributing vastly more relative to their pay than regular workers. These rules protect employees and keep the plan “qualified” for tax benefits.

No legal mandate to offer a 401(k): Importantly, federal law does not require employers to offer a 401(k) or any retirement plan. It’s completely voluntary for private employers. Many large and mid-sized companies choose to offer 401(k)s as a benefit to attract and retain talent (and they get tax deductions for contributions they make).

According to one survey, 94% of employers offer a defined contribution plan like a 401(k). However, that statistic skews high because larger employers are more likely to be surveyed – in reality, it’s mostly mid-to-large employers that have 401(k)s.

Smaller businesses have historically been less likely to offer retirement plans due to costs or administrative burdens. In fact, only 34% of small businesses with under 100 employees offer any retirement plan. This creates a coverage gap where millions of workers at small firms have no employer plan.

The bottom line: By design, a 401(k) is an employer-sponsored plan – you generally need to work for an employer that provides a 401(k) in order to participate in one. If you’re not employed by a company with a 401(k), you can’t simply go open a 401(k) account on your own the way you would an IRA or brokerage account.

However, there are exceptions and alternatives, which we’ll explore next. First, let’s look at a quick historical perspective to understand how 401(k)s became such a dominant workplace benefit.

Are 401(k) Plans Only Available Through Employers? 🤔

Yes – in nearly all cases, 401(k) plans are only available through an employer. A 401(k) is an employer-established plan by definition.

If you don’t work for a company (or organization) that offers a 401(k), you generally cannot go open a 401(k) account on your own. The plan must be sponsored by an employer, who provides it to employees as a benefit.

To participate in a 401(k), you need to meet your employer’s eligibility requirements and enroll in the plan at work. For example, if you join a company that has a 401(k), you might become eligible after 3 months on the job (or maybe 1 year, depending on the plan’s rules).

Once eligible, you’d sign up and start deferring part of your paycheck into your 401(k) account. You cannot bypass the employer and set up a 401(k) directly with, say, Fidelity or Vanguard; those providers can only offer 401(k) accounts as part of an employer’s plan.

The special case – self-employed individuals: The one loophole to the employer requirement is if you are self-employed or own a small business. In that case, you effectively are the employer, and you can establish a 401(k) plan for yourself (and any employees you might have).

The IRS allows what’s called a One-Participant 401(k) – often nicknamed a “Solo 401(k)” or “Solo-k.” It’s basically a 401(k) plan covering just one person (or a married couple who jointly own a business) .

We’ll cover Solo 401(k)s in detail shortly. But aside from being self-employed (and going through the process to set up your own plan), a regular individual can’t open a 401(k) outside of an employer context.

No employer = no 401(k) (but not the end of the story): If you work for an employer that doesn’t offer a 401(k) or any retirement plan, you unfortunately do not have access to a 401(k). This is a common situation – especially among part-time workers, gig economy workers, and employees of many small businesses.

It’s estimated that roughly half of private-sector workers (especially in lower-wage jobs or small firms) lack an employer-sponsored retirement plan. In fact, a Federal Reserve survey found 25% of working adults have no retirement savings at all, and lack of access to a plan at work is a big contributor to that problem.

So yes, 401(k)s are essentially employer-only. However, that doesn’t mean you’re out of options if your employer doesn’t provide one. Below, we outline three major scenarios and what you can do in each case:

Scenario 1: You Have a Job With a 401(k) Plan 👍

If you’re fortunate enough to work for an employer that offers a 401(k) (or similar plan like a 403(b) for non-profits or 457 plan for government workers), take advantage of it! This is your opportunity to save in a tax-advantaged way and possibly get employer matching contributions. Here’s what to do in this scenario:

• Enroll in the 401(k) plan as soon as you’re eligible. Some employers auto-enroll employees, but if not, be proactive. Even if you start small, getting into the plan early builds the habit of saving and lets your money start compounding.

• Contribute enough to get the full employer match, if one is offered. For example, if the company matches 50% of your contributions up to 6% of your salary, try to contribute at least 6%. That match is essentially free money – a 50% instant return on your contribution. Over time, this can significantly boost your retirement balance. Don’t leave this on the table.

• Be mindful of vesting and plan rules. Some employer contributions (like match or profit-sharing) might vest over a year or a few years, meaning you need to stay employed for that period to own those dollars. Know your plan’s vesting schedule, so you understand what you’d keep if you left the company. Also, learn about any investment options and fees in the plan. While you can’t change the options, you can allocate your contributions in a way that suits your risk tolerance (e.g. choosing a target-date fund or a mix of stock and bond funds).

• Maximize tax benefits: Remember, traditional 401(k) contributions lower your taxable income now, which can save you money at tax time. If your plan also has a Roth 401(k) option, consider if contributing after-tax might benefit you (Roth 401(k) contributions don’t save tax now, but give tax-free withdrawals later). Some people do a mix of both.

The key is: if you have access to a 401(k), use it to your advantage. The combination of higher contribution limits and any employer match can put you ahead in retirement savings compared to relying on IRAs alone. And thanks to payroll deduction, contributing is convenient – the money is taken out automatically, so you don’t have to remember to save each month.

Summary of Scenario 1:

Now, not everyone is in Scenario 1. Many people don’t have that 401(k) offer at work. Let’s move to Scenario 2, which covers those without an employer plan.

Scenario 2: Your Employer Doesn’t Offer a 401(k) 😟

Perhaps you work for a small business, a startup, or a company that just hasn’t set up a retirement plan. You might be asking, “What can I do if there’s no 401(k) at my job?” The good news is you still have ways to save for retirement – they just won’t be through a 401(k). Here’s how to navigate this scenario:

1. Open an Individual Retirement Account (IRA). An IRA is the go-to option for individuals without an employer plan. IRAs are opened by individuals through banks or brokers (completely independent of your employer). There are two main types: Traditional IRA and Roth IRA.

• A Traditional IRA works somewhat like a 401(k): contributions may be tax-deductible (depending on your income and whether your spouse has a plan) and investments grow tax-deferred. If neither you nor your spouse is covered by an employer plan, you can deduct your IRA contributions regardless of income, giving you an upfront tax break. Withdrawals in retirement are taxed as income.

• A Roth IRA is funded with after-tax money (no immediate tax deduction), but offers tax-free withdrawals in retirement – both contributions and earnings can be taken out tax-free after age 59½ (provided the account’s been open 5+ years). This is great for younger folks who expect to be in a higher tax bracket later, or anyone who values tax-free income later on.

For 2024, the IRA contribution limit is $7,000 (or $8,000 if age 50+). While this is much lower than the 401(k) limit, it’s still a very useful amount. If you’re disciplined, you can contribute to an IRA each year and build substantial savings. IRAs also offer flexibility in investments – you can choose almost any stocks, bonds, mutual funds, or ETFs you want, giving you control over your portfolio.

One thing to note: if you do have a 401(k) at work, that can affect whether your Traditional IRA contributions are deductible (there are income phase-outs). But since in this scenario you don’t have a 401(k), you likely can deduct a Traditional IRA contribution if you want. Roth IRA contributions have income limits (if you earn too much, you can’t contribute directly), but many people qualify.

In short, an IRA is the primary alternative for those without a 401(k). It might not let you save as much per year, but it ensures you still get tax benefits on retirement savings. You can open an IRA with an institution of your choice (online broker, robo-advisor, bank, etc.) and set up automatic contributions from your checking account to simulate that payroll deduction habit.

2. Consider a taxable investment account if you max out your IRA. If you’re an ambitious saver, you might hit the $7k IRA limit and still want to save more. In absence of a 401(k), the next option is to use a regular taxable brokerage account to invest extra money. While you don’t get special tax breaks on a taxable account (you’ll pay taxes on dividends, interest, and capital gains), investing for the long term in index funds or ETFs can still be tax-efficient.

Think of this as an extension for your retirement savings once you’ve used available tax-advantaged space. It’s not as ideal as a 401(k) or IRA, but it’s better than spending the money or letting it sit idle. Some people earmark a taxable investment account for retirement goals, essentially treating it as an unofficial retirement fund.

3. Check if your state offers a retirement program. A growing number of U.S. states have recognized the retirement savings gap and launched state-facilitated retirement plans for workers whose employers don’t offer one. These are typically Auto-IRA programs: the state requires employers (above a certain size) with no plan to automatically enroll their employees in a state-run IRA program.

The default is often a Roth IRA, with a small percentage of the paycheck auto-deposited, though employees can opt out. For example, California’s CalSavers, Illinois’ Secure Choice, and Oregon’s OregonSaves are such programs. As of 2025, 17 states have enacted laws to set up state-sponsored retirement plans, and more are in the works.

These state programs are essentially a safety net: if your employer doesn’t offer a plan, and you live in a state with an auto-IRA, your employer might be required to facilitate your enrollment in the state’s program.

The contributions go into your individual IRA managed by the state’s program administrator. For you as an employee, it operates similarly to an employer plan – payroll deductions go into your account. The difference is it’s not a 401(k); it’s an IRA (so normal IRA contribution limits and rules apply).

Important: State auto-IRAs are portable. If you change jobs, your account stays with you (since it’s your IRA). They usually invest in a simple menu of options (like target-date funds). If your employer later starts its own 401(k), you can choose to roll your state IRA savings into that or keep it separate.

These programs are relatively new (most launched in the last few years). They’ve faced some legal challenges – for instance, a group challenged CalSavers, arguing that a state-required retirement program might conflict with ERISA. However, the courts have upheld these programs.

In 2022, the U.S. Supreme Court declined to hear an appeal against CalSavers, effectively letting stand a ruling that CalSavers (and similar auto-IRA programs) are not preempted by ERISA. The reasoning was that these programs are set up by the state and don’t require employers to establish their own plan, so they don’t interfere with ERISA plans. This cleared the way for states to continue expanding such initiatives.

If you’re in a state with a mandate and your employer doesn’t offer a plan, they will likely notify you and facilitate enrollment. If you’re not in such a state (or you opt out of the program), you should proactively do step 1 and open your own IRA. Either way, don’t let the absence of a 401(k) stop you from saving. It may require a bit more personal initiative, but you can and should build your retirement nest egg.

Summary of Scenario 2:

By following these steps, even without an employer plan, you can secure your future. It requires building your own disciplined saving plan, but the tools are there (IRAs, etc.). Next, let’s discuss scenario 3, which is a bit different – if you are self-employed or run a business.

Scenario 3: You’re Self-Employed or a Business Owner 💼

If you’re self-employed – whether you’re a freelancer, independent contractor, gig worker, or you own a small business – you don’t have a traditional employer to offer you a 401(k). But the flip side is, you have the power to create a retirement plan for yourself (and your employees, if any). In this scenario, you effectively wear two hats: you are the employer and the employee. There are special retirement plans tailored for people like you:

1. Solo 401(k) (One-Participant 401(k)): This plan lets a self-employed person establish a full-fledged 401(k) plan for themselves. The IRS makes it clear that a one-participant 401(k) is not a new type of plan, just a regular 401(k) covering only a business owner (and spouse) with no employees. As the business owner, you can contribute in two ways:

• Employee deferral: You can contribute up to the standard 401(k) limit (for 2024, $23,000 plus $7,500 catch-up if age 50+) as “your own employee.” This can be up to 100% of your self-employment earnings, capped at the limit.
• Employer contribution: Your business (you, wearing the employer hat) can also contribute up to 25% of your compensation as a profit-sharing contribution. For sole proprietors or single-member LLCs, this is effectively 20% of net self-employment income due to how calculations work.

Combining these, the total contribution can be very high. In 2024, the total max is $69,000 (or $76,500 if age 50+) for one participant. You need sufficient earnings to hit that, of course, but it means a Solo 401(k) lets you potentially save much more than an IRA would. For example, suppose you’re 40 years old and earn $100,000 from self-employment. With a Solo 401(k), you could defer $23,000 as employee, and contribute up to $25,000 as employer (25% of $100k), totaling $48,000 saved in one year. By contrast, an IRA would only allow $6,500. This illustrates the huge advantage for high-earning self-employed individuals.

Solo 401(k)s can be set up with many brokerages or financial institutions. They do involve a bit of paperwork – you have to adopt a 401(k) plan document (often the broker provides a template) and, once your plan assets exceed $250k, you must file an annual Form 5500 with the IRS. But these are manageable tasks for the benefit gained. Solo 401(k)s can be Traditional or Roth (some providers allow Roth contributions too), giving tax flexibility.

One thing to remember: A Solo 401(k) is only for businesses with no full-time employees (other than the owner/spouse). If you later hire employees, you’d need to either convert it to a regular 401(k) plan covering them or terminate it and switch to a different plan type, because you can’t continue excluding employees beyond certain part-time thresholds.

2. SEP IRA (Simplified Employee Pension): A SEP IRA is another popular option for self-employed people and small businesses. It’s simpler to administer than a 401(k). Essentially, only the employer contributes to a SEP IRA, but you can contribute up to 25% of your net self-employment income, with the same overall dollar limit ($66,000 for 2023, $69,000 for 2024). If you have no employees, a SEP IRA effectively lets you contribute a similar amount as the employer portion of a Solo 401(k). However, SEP IRAs do not allow the separate employee deferral – so the maximum contribution might be a bit lower especially if your income isn’t very high. For instance, with $100,000 income, SEP 25% would allow $25,000; whereas a Solo 401(k) allowed $48,000 by combining employee+employer. So, Solo 401(k) has an edge for maximizing contributions. But a SEP is very easy to use (no annual filing requirements) and you can open one at most financial institutions with minimal fuss. Many solo business owners use SEP IRAs if they don’t need the higher deferral or Roth features of a 401(k). Note: If you have employees, a SEP requires you to contribute the same percentage for them as you do for yourself, which can be costly. It works best for solo operations or when you want to contribute uniformly for a small team.

3. SIMPLE IRA (Savings Incentive Match Plan for Employees): This is a plan designed for small businesses (up to 100 employees) that is simpler than a 401(k) but still involves employee contributions and employer match. A SIMPLE IRA allows employees to defer up to $15,500 a year (2023 limit; slightly higher in 2024) and the employer must either match contributions (usually 3% of pay) or contribute 2% for all eligible employees. For a self-employed person, a SIMPLE IRA could allow a bit more contribution than a standard IRA but much less than a Solo 401(k). Most solo business owners prefer SEP or Solo 401(k) over SIMPLE if they qualify, but SIMPLE IRAs are common in small businesses with a handful of employees due to low costs and ease.

Which should you choose? If you’re purely self-employed with no employees, a Solo 401(k) often gives the most saving power, especially if you want to contribute a lot or use Roth options. If you want minimal paperwork and are okay with contributing mostly as a percentage of profit, a SEP IRA is a fine choice. If you have a few employees and want something easier than a full 401(k) plan, a SIMPLE IRA could fit. You might consult a financial advisor to pick the best for your situation. But the main point is: being self-employed doesn’t bar you from having a 401(k)-like plan – you just have to be the one to set it up.

Also, remember you can combine strategies: For example, you could contribute to a Solo 401(k) from your self-employment income and contribute to an IRA (though if your self-employment makes you covered by a plan, it might affect IRA deductibility). And if you have a day job with a 401(k) plus a side business, you can actually max both, as long as they’re from different employers (subject to some IRS aggregation rules). That’s an advanced scenario, but it highlights that self-employed retirement plans are flexible.

Tax benefits for self-employed plans: Like regular 401(k)s, contributions are generally tax-deductible (traditional) and grow tax-deferred. As a self-employed person, any employer contributions (SEP, or the employer portion of Solo 401(k)) are a business expense deduction for you. This can help reduce your Schedule C or business taxable income. Essentially, you’re funding your own retirement and getting a tax break to do so.

Finally, be aware of new incentives: The SECURE Act and SECURE 2.0 Act have introduced or expanded tax credits for small businesses starting new retirement plans (including Solo 401(k)s and SIMPLEs). For instance, there are credits that can cover startup costs and even provide a credit based on contributions for new plans. This is beyond our scope here, but it’s worth noting that policymakers are trying to encourage more small employers to establish plans – which might benefit you if you go that route.

Summary of Scenario 3:

By leveraging these options, self-employed individuals can enjoy the same kind of tax-advantaged retirement saving that corporate employees get – sometimes even more. Don’t overlook setting up your own plan; your future self will thank you for every dollar you put aside and invest today.

401(k) vs. Other Retirement Accounts: Key Differences 📊

We’ve talked about 401(k)s, IRAs, and other plans. Let’s compare them side by side to really understand the differences. This will help highlight why a 401(k) (through an employer) is so valuable, and how IRAs stack up as alternatives when a 401(k) isn’t available.

401(k) vs IRA – quick comparison:

As you can see, 401(k)s and IRAs share the goal of retirement saving with tax advantages, but they differ in important ways. The biggest differences are in who provides them (employer vs self), the contribution limits, and the presence of employer matching in 401(k)s. A quick rule of thumb often given by financial planners is: if you have a 401(k) with a match available, contribute enough to get the match, because that’s a 100% return on those dollars. Then, if the 401(k) has poor investment choices or high fees, consider putting additional savings into an IRA where you have more control, up to the IRA limit. After that, if you still have more to save, go back to maxing out the 401(k) or investing in taxable accounts.

In reality, many modern 401(k) plans are quite good (with low-cost index fund options), so it often makes sense to contribute as much as possible to them, especially since the limits are high. But if your plan is subpar, the IRA is a nice supplement or alternative for extra savings beyond the match.

What about other employer plans? If you work in the public or non-profit sector, you might encounter 403(b) plans (for schools, charities, etc.) or 457 plans (for government or some non-profit employees). These function similarly to 401(k)s (tax-deferred, similar contribution limits). The specifics differ a bit – for example, 457 plans don’t impose the 10% early withdrawal penalty if you separate from service, and 403(b) plans often invest in annuities or mutual funds – but by and large, they are also employer-provided plans. So if the question is “Are 403(b) or 457 only through employers?” – yes, those too are only via your employer. The average person in a non-profit job can’t open a 403(b) on their own either; they’d use an IRA if their workplace lacks a plan.

Now that we’ve covered the landscape of options and comparisons, let’s weigh the general pros and cons of using a 401(k) plan versus not having one.

Pros and Cons of 401(k) Plans (If You Have Access to One)

Having a 401(k) is a great benefit, but it comes with some limitations too. Here’s a summary of the advantages and disadvantages of 401(k) plans, especially in comparison to the alternatives:

Overall, the pros of a 401(k) – especially the ability to save more and get employer matching – usually outweigh the cons. The cons can often be mitigated (e.g., if investment choices are limited, you can still find acceptable options like broad index funds; if fees are high, you might lobby your employer or invest enough to get the match and do extra saving in an IRA). The lack of a 401(k) is generally a disadvantage in one’s financial planning, but it’s not insurmountable thanks to IRAs and other vehicles as we’ve seen.

Next, we’ll wrap up with some common mistakes to avoid when dealing with retirement plans and then a quick FAQ on this topic.

Mistakes to Avoid 🚫

When it comes to retirement savings and 401(k) availability, people often make some missteps. Here are key mistakes to watch out for, and how to avoid them:

• Mistake #1: Assuming “No 401(k) = No Retirement Saving.” Too many workers without an employer plan simply do nothing for retirement. Don’t let the perfect be the enemy of the good. If you don’t have a 401(k), open an IRA and start saving something. It may not allow as much, but even saving 5-10% of your income in an IRA or Roth IRA is far better than saving 0%. The worst thing is to throw up your hands and not save at all.

• Mistake #2: Not maximizing an available 401(k) match. If you do have a 401(k), failing to contribute at least enough to get the full employer match is basically leaving free money on the table. For example, if your employer matches 4% and you only contribute 2%, you miss out on an extra 2% of salary that could be yours. Always try to contribute at the match threshold, even if money is tight. Adjust your budget – that match is a guaranteed return.

• Mistake #3: Cashing out a 401(k) when leaving a job. It can be tempting, when you change jobs, to take a 401(k) balance as cash (especially if it’s a smaller amount). But this is usually a costly mistake – you’ll pay income taxes and a 10% penalty if under 59½, easily eroding 20-30% (or more) of the balance. Plus, you lose those savings for the future. Instead, roll over the 401(k) to your new employer’s plan or into an IRA. That preserves the tax benefit and keeps your money growing. Even if the amount seems small, it could grow significantly by retirement if left invested.

• Mistake #4: Forgetting about old 401(k) accounts. People who switch jobs frequently might leave behind a trail of 401(k)s. It’s not terrible to have multiple accounts, but it can lead to neglect. Be sure to keep track of your old plans. Consider consolidating them (roll them into one IRA or into your current employer’s plan) so it’s easier to manage. Lost or ignored accounts might be sitting in overly conservative investments or incurring fees you’re not aware of.

• Mistake #5: Ignoring retirement saving because of gig/part-time status. If you’re a gig worker or work part-time without benefits, it’s easy to procrastinate on retirement saving. You might think, “I’ll worry about that when I have a real job with a 401(k).” But the years can pass by. Even if you’re freelance or between full-time jobs, start an IRA or Solo 401(k) for your freelance income. Consistent saving is more important than the vehicle. Don’t wait for an employer to get started; you may end up waiting for years and losing valuable time for compounding.

• Mistake #6: Not investigating state or employer alternatives. Some people aren’t aware that their state has an auto-IRA program or that their employer might offer a SIMPLE IRA instead of a 401(k). Always ask HR what (if any) retirement programs exist. Small employers might not have a 401(k) but could have a SEP or SIMPLE plan. Or a state program might be coming soon. Stay informed so you can participate when available.

• Mistake #7: Over-relying on one account type. Diversify your tax treatment. If you have a 401(k), consider also contributing to a Roth IRA (if eligible) to have tax-free income later. If you have only a Roth 401(k), maybe also contribute pre-tax to balance your tax exposure. And if you’re self-employed, consider having both a Solo 401(k) and an IRA – one could be Roth, one traditional. The mistake is not considering a mix of accounts, which can give flexibility in retirement.

Avoiding these pitfalls will help ensure that you’re making the most of whatever retirement saving options you have, whether through an employer or on your own.

FAQs on 401(k) Availability and Alternatives

Q: Can I open a 401(k) plan on my own without an employer?
No, you generally cannot open a 401(k) by yourself. A 401(k) must be sponsored by an employer, so individuals without an employer plan must use alternatives like IRAs or a Solo 401(k) if self-employed.

Q: Do employers have to offer a 401(k) or any retirement plan by law?
No, most employers are not required by federal law to offer a 401(k). It’s voluntary. However, some states now mandate that companies without a plan must enroll employees in a state retirement program, effectively requiring an option.

Q: I don’t have a 401(k) at work – can I still save for retirement effectively?
Yes, you can absolutely save for retirement without a 401(k). You can contribute to IRAs (Traditional or Roth) each year and even invest in regular accounts. While the limits are lower and there’s no employer match, consistent IRA savings and good investing can still build a substantial nest egg over time.

Q: Can self-employed individuals set up a 401(k)?
Yes, if you’re self-employed you can establish a Solo 401(k) plan. This lets you contribute both as employee and employer, often enabling very large contributions. It’s one of the best retirement savings vehicles for business owners without other employees.

Q: Is a 401(k) better than an IRA?
Yes, in terms of contribution limits and employer match potential, a 401(k) offers advantages. It allows more money to be saved pre-tax and may include employer matching. However, IRAs provide more investment choices and no employer is needed. Ideally, use both: contribute to your 401(k) (especially to get any match) and use an IRA to supplement your savings or diversify tax advantages.

Q: What happens to my 401(k) if I leave my job?
You keep it – the money in your 401(k) is yours (plus any vested employer contributions). When leaving a job, you can leave the 401(k) with your old employer, roll it over into an IRA, or roll it into your new employer’s 401(k) if they allow. It does not disappear, and you shouldn’t cash it out unless absolutely necessary due to taxes and penalties.