Today’s question asker works in the service industry, which means their job doesn’t offer retirement accounts like a 401(k), 403(b), or a pension. This is the case for lots of people! Although these tax-advantaged retirement accounts are a cornerstone of personal finance advice, they’re only offered by 14% of U.S. companies. If you work for yourself, part time, in a tips-based job, or for a very small employer, a 401(k) may not be an option for you.
Does this mean you should just give up on the idea of saving toward your retirement?
Good news, bitches. You don’t need a traditional retirement account to save towards your retirement. The classic 401(k), 403(b), and pensions are not your only options! Good options for retirement savings exist for everyone, regardless of their industry or employment status. We’re going to tell you about them today.
This week’s question
Today’s question comes to us from Piggy’s friend Jared. (Does being our personal friend jump you to the front of the line? Butter us up and find out for yourself!) Jared asks…
How do I save for retirement without a 401(k)? Whenever people talk about saving for retirement they mention 401(k)s and pensions, but I don’t have any of that. I work in the service industry and I have an IRA. I want to know how to prioritize and plan for retirement without that big fancy 401(k).– Piggy’s pal Jared
If you haven’t started saving for retirement yet, it’s okay—it’s probably because nobody made it easy for you. If we’ve inspired you to turn that around, here are a few articles where we go more in-depth into how to get started:
- Dafuq Is a Retirement Plan and Why Do You Need One?
- Procrastinating on Opening a Retirement Account? Here’s 3 Ways That’ll Fuck You Over.
- The Financial Order of Operations: 10 Great Money Choices for Every Stage of Life
- Ask the Bitches: Is It Too Late to Get My Financial Shit Together?
- Investing Deathmatch: Traditional IRA vs. Roth IRA
- Do NOT Make This Disastrous Beginner Mistake With Your Retirement Funds
- How To Save for Retirement When You Make Less Than $30,000 a Year
Obviously, people like Jared won’t feel steered right by the majority of personal finance advice. We try really hard to be thoughtful about a broad range of employment experiences! But even we default to talking about traditional accounts when we talk about vehicles for retirement savings. I’d be really discouraged from saving for retirement if I couldn’t even follow step one of the most popular advice.
If you work in a job that doesn’t offer retirement accounts, listen to today’s episode. We list lots of alternative ideas for how to save, from traditional IRAs and Roth IRAs to less tax-advantaged (but still awesome!) ways to grow long-term wealth.
Watch our answer below, or listen in the podcast player of your choice.
And if you’d prefer to listen without video, you can subscribe in the podcast app of your choice, or listen here…
This episode was brought to you by Acorns, the automated mini-investing app that’s perfect for tiny broke babies and the chronically financially lazy. It’s really intimidating for a total beginner to get into investing. Which is why we love Acorns. They make it truly easy to save money, make money, and gain the confidence to make bigger investment decisions later on. (Like the ones we talked about in today’s episode!)
I’m proud to say that this episode’s Acorns ad is—by leaps and bounds—the most insane thing we’ve ever recorded. It was at the end of a long recording session, and we were feeling pretty punchy, and… well. You’ll have to see it for yourself. It sketches an elaborate alternative history in which Piggy and I are hockey moms from Wisconsin, for reasons that make perfect sense only to us. Our producer left a solid fifteen minutes of “opes” and “shhhhyures” and “go Packers” on the cutting room floor because she’s a coward. If you want us to release the Snyder cut of the Acorns ad, join us on Patreon. That’s exactly the kind of embarrassing outtake we love to post for our most supportive readers.
Episode transcript (click to reveal)
This episode, like all of our episodes, is brought to you by our beloved Patreon donors. This week we want to thank Ann, Analiese, and Jasmine. And an extra special thanks this week to Daria. Daria is the feeling that you get when you correctly identify the song title and artist, without using Shazam.
Okay so I’m working on a theory.
Mm. Yes, hit me.
There is a stereotype about people with ADHD being really, really bad with money.
One of the questions that I’ve been asked as part of diagnostic criteria is like, are you an impulsive spender? Do you struggle sticking to a budget? Things like that. I’m working on a theory that actually, people with ADHD can be amazingly good with money, and as proof of this—last time you and I were at a personal finance conference we had a nice chat with Mr. Money Mustache.
We sure did.
He mentioned he’s got ADHD.
Now. We also have a best gal pal and industry mentor in Mr. J. D Roth.
[sing-song] Mr. J. D. Roooooth.
Also has ADHD.
Our actual gal-gal pal, Paula Pant.
She did not mention specifically that she has ADHD or that she’s been diagnosed with ADHD, but she did tell us that she had to run back to the hotel because she only shaved one leg in the shower.
This is true and she was about to get on stage with only one leg shaven and the other one not.
I think that is a full, like if you were like borderline in an interview with a diagnostic professional, and then you pulled up your pant legs and showed one leg shaved and the other leg unshaved, they would be like, here you go, ma’am. Here is your certificate of ADHD.
So I would really love to—like this is something I would love to write about more in the future, as someone with ADHD. How neuro-atypical folk, such as myself and yourself as well, how we often, I think, are unfairly typed based on our psychiatric diagnoses as being inherently untrustworthy with money when in fact, if properly motivated and encouraged, lordy we’re good at this shit.
Y’all can be single-minded on that. I think we need to erase the stereotype in general that ADHD is a 7 year old boy running around screaming while some beleaguered babysitter, parent, or teacher is like, please just sit down for 5 minutes, Johnny!
But they’re so annoying that it makes them so easy to diagnose. Whereas the habitual daydreaming girl who’s at the back of the class and who gets straight A’s because learning actually interests her? Yeah, no, we can’t diagnose her. She’s—she’s good. She’s great. She’s got to wait till she’s 35 to have a full fucking meltdown. Like the rest of us! I worked hard to get to this point.
Are you projecting some personal experience there?
How dare you seek a diagnosis at an appropriate age. Who do you think you are?
Theme Song 3:22
If you need some dough
You don’t know where to go
In this patriarchal capitalist hellscape
Well here’s the ‘sitch
We’re gonna help you, sis
Because bitches get riches
Bitches get riches
Bitches get riches
Bitches get riches
And so can you
This has been the Kitty and Piggy Break Down Neuro-atypical Stigma Comedy Hour.
Podcast and Media Empire. And anyway—
Podcast and Emporium.
And I’m Piggy.
We are the bitches in Bitches Get Riches.
And we are exhausted, frankly.
And we are here to nap as much as humanly possible.
But our time on this planet is limited.
So let’s get started.
Alright, so today’s letter comes to me from my very lovely friend, Jared. Hey Jared, I know you’re listen—
No, not Jareth the Goblin King. Jared the assistant brewer.
Oh. I was really hoping for some kind of question about like, goblin taxation structures, but FINE. Hit us with stupid Jared’s question.
Um, Jareth the Goblin King does not concern himself with petty trifles such as taxation.
[wiggling fingers in the air, imitating Jareth from Labyrinth with his crystal ball] I’m touching balls.
[wiggling fingers in the air, imitating Jareth from Labyrinth with his crystal ball] You’re touching balls?
That’s what I’m doing here.
Are you juggling balls?
Continue on, read your letter while I touch my balls.
Sir, we can’t get the codpiece any bigger! Jared, not Jareth, says: How do I save for retirement without a 401(k)? Whenever people talk about saving for retirement they mention 401(k)s and pensions, but I don’t have any of that. I work in the service industry and I have an IRA. I want to know how to prioritize and plan for retirement without that big fancy 401(k).
I feel like this is pertinent to a lot of people because people are more and more gravitating towards employment that does not come with retirement benefits, so this is important.
Oh yeah, bless his heart when he mentioned pensions. I was like, who the fuck has a pension anymore? Unless you’re in a union—
I have a friend who’s a firefighter, yeah.
Unless you’re in a union, you don’t have a fucking pension.
You don’t have a fucking pension.
We don’t give those out anymore.
Exactly. No, my firefighter friend has a pension and he’s the only pension—oh, and my parents who are in the army. Like they are the only pension-havers I know.
That’s the ultimate. That’s the ultimate union, is having that—
I know. Yeah, you get that government money.
That sweet sweet military budget. Can’t cut that. It’s gotta double every year!
Yeah. Except you know what happens? All of the budget extensions for the military go into predator drones and stuff, and meanwhile veterans are on food stamps.
Well, we can’t take care of people who were injured by burn pits. God, what do you think this is, a fucking charity?
Okay, we are off topic already and my blood is boiling.
Love it! I love this for us.
Let’s get to it. So Jared asks about saving for retirement without a 401(k) or a pension, and he does mention he has an IRA. So let’s start by talking about IRA’s and how they’re a good idea for everyone.
There’s an easy thing to misconstrue when you’re talking about saving for retirement, which is that I will only—when I retire, the only source of money I will have in my golden years will be if it’s in a retirement account. And that is—
And that is false.
—not true. Correct. What a retirement account, a dedicated retirement account, basically the only thing that’s special about it is that it’s tax-advantaged.
Meaning that you pay less in taxes if you use it in the way that it is intended to be used. So if you pull that money out early, when you’re in your say, forties, you’re not going to get the tax advantaged account. But if you use it when you are in your seventies, then you’re good.
The only thing special about a 401(k), a pension, and the various IRA’s is that they are tax-advantaged. And that’s a nice fancy way of being like you can lessen the amount of money you have to pay to collect those retirement benefits. You can have a Roth IRA, a traditional IRA, or a SEP IRA, which stands for…
What the fuck’s a SEP IRA? I actually do not know this.
A SEP IRA—yeah, no, I am here to educate you. You’re watching it in real time, people.
It’s so nice to be like, whenever I don’t know something turn to you and there’s a solid 65% chance that you know what it is.
I mean, listen of the two of us I am—I was going to say the nerdier, but I’m like, no that’s really—no, I just tend to remember things that I read.
I cannot remember what I ate for breakfast and I cannot remember to eat breakfast. So please, continue.
Okay, great, we’re perfect. Okay, so a SEP IRA stands for a Simplified Employee Pension Plan IRA, and it’s an easy way to administer a retirement plan if you are self-employed, if you own a business, or you employ others. So, a lot of folks who work in the gig economy or the service industry or anything like that, it’s recommended that they get a SEP IRA. And it’s tax-advantaged similar to a Roth IRA or traditional IRA. The important thing to remember though, is that you have to fill it with earned income, so you do have to report that money to the IRS or whatever.
Ah gotcha, so you can’t be secret tip boy.
You can’t be secret tip boy, no. If you are secretly squirreling away your tips, this is not a good place to keep them.
Which is smart, keep doing that. But use it to buy your groceries.
Yeah, exactly. Exactly. And I’m gonna give a shout out to our girl Barbara at Tipped Finance. If you do work in a tipped industry, like you should be following her.
IRA’s, there’s a yearly limit on how much you can contribute and honestly, it’s not that much.
No, it’s $6,000 a year.
Which is like, okay if you save 6 grand a year I hope for a future with much deflation I guess. Like I don’t know how far that’s going to go when houses are all like 4 fucking million dollars. So I think for someone like Jared that the best way to think about it is any way that you grow wealth, especially if you’re on the younger side, if you’re say like younger than maybe 40, 50. The best thing that you can do for yourself is to grow wealth, period. There may be better ways than, you know, obviously if you can hit that goal of 6 grand 6 ½ grand, whatever it is, if you can hit that goal, that’s great. And do that every year. It’s a great starting point, but it is not going to get you to a nest egg that you could retire on, right? Unless you’re extraordinary lucky and frugal. If you’re not there. Hey, it’s okay. Anything that you can do to help yourself grow wealth is going to ultimately make you more prepared to retire. We have an article called How To Save For Retirement If You Make Less Than $30,000 A Year. That’s a great guide, please go check that out, pal Jared.
You can read it at bitchesgetriches.com
And subscribe to our Patreon and check out our Etsy shop bleh bleh bleh. So definitely go check that out. But also, think about it this way. If you retire with an IRA that only has $100,000 in it and that’s your only source of like tax-advantaged retirement income, but you live in a house that you own outright, you have no other debts, and you have a stable source of health insurance, then you’re actually in a much better position than how you may appear to be on paper. Whereas there are plenty of people who have like huge 401(k)s, because they’ve diligently, you know, worked white collar jobs that offer them and they have put in 10% of their income year over year or even more, but they have a ton of student loan debt from sending their kids to college. They have a second mortgage out on their home. And they may appear to be better on paper but they’re actually less prepared to retire than you might be.
Exactly, exactly. Yeah, I think you touch on one of the most important preparations for retirement that anyone can do, which is to minimize your after retirement expenses. If you go into retirement in debt, if you go into retirement with a mortgage and with a very high-cost lifestyle, like you’re mathematically speaking going to need to have more money with which to pay for that lifestyle. Whereas if you go into retirement debt-free, owning your home outright without a mortgage, and having a frugal but enjoyable lifestyle like, you’ll need less money in retirement. And you’ll look around at people who have 401(k)s that they’re burning through and you might be like, well, they had that tax advantage, but I have the advantage of having lessened my expenses to the point where I am living pretty high and mighty on my IRA and Social Security.
Ooh, which is something we should talk about!
Today’s Sponsor 13:07
[Midwestern accent] Oh hey dere!
Hold on, hold on. [Midwestern accent] I gotta call you on the phone.
[Midwestern accent] Oh okay, okay sure, yah.
[holding hand to her face to mimic a phone] Ring ring! Ring ring!
[holding hand to her face to mimic a phone] [Midwestern accent] Oh hey dere!
[Midwestern accent] Oh hi! You know, I was just over here at my nephew’s hockey game and he was telling me about Acorns. Do you know about this?
[Midwestern accent] Ohh. Oh yes, don’tcha know! Yeah, my nephew was telling me down at the rec center on the Friday night while they were playing the hockey—
[Midwestern accent] Sorry, “hackey.”
[Midwestern accent] With your Thomas.
[Midwestern accent] “Hackey.”
[Midwestern accent] He plays “hackey—”
[Midwestern accent] That Acorns is micro-investing for newbie investors up in that stock market.
[Midwestern accent] That’s right! Yeah, what I heard is that it’s great for beginning investors and anybody what’s having a hard time saving—
[Midwestern accent] Oh sure, yah.
[accent begins to devolve] —because it’s automatic and totally effortless!
[Midwestern accent] Oh, don’tcha know!
Oh no, I’m going to—hold on, back to Wisconsin!
[Midwestern accent] back to Wiscon—
[Midwestern accent] Ope! Let me just squeeze by ya here and just explain to ya how this investing app works.
[Midwestern accent] Oh sure yah.
[Midwestern accent] Alright so, Acorns.
[Midwestern accent] Acorns.
[Midwestern accent] Every time you make a purchase with Acorns, they’re gonna go ahead and round it up to the nearest dollar, okay?
[Midwestern accent] Ohhh. Okay, yah, sure.
[Midwestern accent] And they’re gonna save that difference for you, and not only that, guess what?
[Midwestern accent] Oh, okay yah.
[Midwestern accent] They’re gonna invest it for ya.
[Midwestern accent] Oh sure, yah, don’tcha know.
[Midwestern accent] Oh, you know what, I’m gonna have to drop this call because I’m about to go inside the Piggly Wiggly and you know they ain’t got no reception.
[Midwestern accent] Oh no!
[Midwestern accent] Go ahead and click that link on the show notes.
[Midwestern accent] Okay sure, yah.
[Midwestern accent] It’s too long to read out loud because they didn’t give us a vanity url.
[Midwestern accent] Oh, they sure didn’t give us that vanity no. Oh they sure didn’t.
[Midwestern accent] Oh my goodness. Goshdarnit. I’m sorry to swear.
[Midwestern accent] Oh my! Oh my chestnuts! That’s why we need to start investing with Acorns today before I completely lose my regional accent.
Kitty & Piggy 14:34
End of Sponsored Content 14:37
Oh my god, we never talk about Social Security!
We rarely talk about Social Security just because our core audience is pretty young and that tends to be something that only comes up rather late in life.
You should never approach retirement plans by saying, I know that Social Security is a thing and therefore I’m not going to save for retirement in any other way. No, that is not how the world works. That is not how inflation works. That is not how any of this works! You will receive Social Security if you have worked and earned a paycheck legally in the United States, you will receive Social Security. The amount will vary by how many years you worked and what your income was for those years. But I think everyone should really look at Social Security as a nice little icing on the top of the other preparations they’ve made for retirement.
Yeah, not something to count on as like, ahh the government will send me a check as soon as I turn 65 and one half years old like, no, don’t count on it. And don’t think it’s going to be enough.
No, it’s more like, ahh the government has sent me my grocery bill for the month. Like that is what it is. It’s not going to cover all of your living expenses. It’s not going to be everything you need. I think the maximum amount anyone can receive in a monthly Social Security Check is $4,147. So.
Well I would like that.
How do I get that? Do I have to have like 18 children?
Here’s how you get it. You work at a salary of $147,000 a year for 35 years or more.
Who are you that you just know this shit? Good god.
I’ve been editing a lot of Social Security content for my day job recently.
My point being, don’t expect that you’re going to get a $4,000 check. You’re probably going to get like a $1,200 check.
Yeah, like an $800, $600 Social Security check. It’s not going to be a lot. So it’s nice to have, but in my opinion it’s almost not worth planning for. Have your IRA and then, like Kitty said, you should be building wealth in other ways. You should be, you know, focusing on having just a regular old brokerage account that you can tap into in your dotage, as well as you know, lessening your debt, accruing assets that will increase in value, like a home, not like a car. And stuff like that.
Yeah I really like that. And I think in general, a lot of younger folks I think possibly over prioritize saving for retirement.
This is a generalization, but it’s like the one thing that I think people are semi-consistently told to do. Like you have to be saving for retirement, you have to be setting aside money for your retirement, and so as soon as you sign up for a job or you’re filing your taxes and they say, do you want to open an IRA or do you want to invest in your 401(k)? You’re kind of like—
Yeah, dad said I should so I guess I will. But again, like it is only tax-advantaged. I think it’s pretty wise to max out company matching. When you do have a 401(k) and your company can kick you back some of that money, that’s great.
Def. Free money.
Free money, get that. But overall, I would rather be in a position where I was say, 10 years into my life as an investor and I had $100,000 socked away in an accessible format like a general brokerage account versus $100,000 in a retirement account, because there are ways you can pull from your retirement account, there’s certain very niche things that you can do that you won’t get hit with a tax penalty to borrow from your future self but in general, it’s just not a good idea. It doesn’t give you a ton of flexibility.
Yeah, we discourage that.
So if you are behind—behind is a big bunny ears—in your retirement saving, don’t lose hope.
You’re gonna be fine.
There might be other things that you have prioritized, like an education, or buying a home, or whatever, that will put you in ultimately a better position. And I think that those tax-advantaged accounts, they have a lot of catch-up mechanisms, so if our pal Jared—maybe now he’s 20 or 25, or 30 or 35, and he doesn’t have a job that has a 401(k). Well, guess what? Life is long.
Life is long.
The average person has over a dozen jobs throughout their lifetime. So the odds that you will one day find yourself in a position that does have you know, 401(k)s or pensions, pretty high! You might get there. And you have a lot of time to find that out. And you can always play catch-up. There’s a ton of mechanics that allow you to invest more to play catch-up because they know from experience that people don’t always prioritize that early saving. So there are a lot of them. I think as time marches on, we’re likely to see more of them even, in the future.
Number one I think is do not stress. Reduce debt. Build wealth. Lead a good life. Minimize your expenses in retirement and save what you can in that IRA, which is not a ton but it’s a starting point.
And I also want to specify like, when we say save in an IRA or, you know, build wealth in a brokerage account. We don’t just mean like putting money in there and letting it sit and gather dust. We mean, fucking invest it. Don’t make my mistake. We have an article all about allocations. Again, if you go to bitchesgetriches.com, you can read our article on what to do with the money in your investment accounts. But basically, you can’t just stick it in there. You got to give it a job. And you do that by choosing investments within that fund.
Yeah people, this is a 2 step process. I cannot prioritize enough.
Yeah, 2 step process.
Step 1, you put the money in. Number 2, you tell the money what to do.
Yes, exactly. And for most people, the answer there is low-cost index funds. And again, we have articles on this but, you know, get your money in an investment account, allocate it towards an index fund and you’ll be fine. It will build wealth, it will build compound interest according to the stock market, and it’s going to be great. You can pull it out in retirement, and you’ll have to pay some taxes on that, because that’s how that works. But you’ll have way more in that account than if you had just stuck it in a savings account.
And that’s great news. Yeah. I love it. I love it.
Alright well, are you good with that?
I am good with that.
Listeners, if you want us to answer your question, go to bitchesgetriches.com and click “Ask the Bitches.” After all, this podcast is listener-supported. We are committed to never ever putting our best content behind a paywall. Only our worst content. So if you like what we do and you want us to keep doing it, you can support the podcast by joining our Patreon at patreon.com/bitchesgetriches. And if you need even more Bitches in your life, and who could blame you, you can read our articles or follow us on social media at bitchesgetriches.com.
Hey, is there anything else they should know?
Yes. This is important content that is directly related to personal finance early to mid career development, and/or adulting skills.
The 3 best Predator movies are as follows. Number 3: Predator. 1987. A classic for a reason. Number 2: Predators. 2010, starring Adrian Brody. Do not knock it until you have tried it!
One of my favorite openings to a film ever. Cold open with Adrian Brody waking up mid-parachute drop in the sky—
—wondering where the fuck he is and how the fuck he got there and it’s great and he looks very respectable while shirtless.
Oh, that surprises me.
Finally, this year’s Prey. Excellent. Possibly by now already solidified as a conventional answer, however it is the correct one. I want the best for all of our readers and listeners. Y’all gotta go watch Prey.
Good to know.
Kitty & Piggy 23:33
5 thoughts to “Season 4, Episode 5: “401(k)s Aren’t Offered in My Industry. How Do I Save for Retirement if My Employer Won’t Help?””
I’m not an American so I am not an expert here. But I believe that a person starting out who is able to save but is not in a high tax bracket would be better off establishing a tax free savings account, in which the contributions are made with after tax dollars. In Canada these are indeed called “Tax Free Savings Accounts” (TFSA). In the USA you have a Roth-Ira. Again, not sure about the ins and outs in the USA, but if the tax deduction is not worth much to you, this is the road to go down in terms of saving for retirement.
Hey Bitches: how about an article about the Roth?
Hi Martinus: Our Patron Bitches previously wrote about Roth IRAs in this article: https://www.bitchesgetriches.com/traditional-ira-vs-roth-ira/
What MH said! Thank you both. <3
It’s a shame some companies are stopping their 401k matching. great episode
Yes it is. I’m sure they’re justifying it as a way to cut costs with margins getting slimmer, but still. Thanks for listening!