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A 401(k) plan is a retirement savings vehicle many employers offer. Perhaps you offer a 401(k) plan to your employees.

Contributions are deducted directly from employees’ paychecks. When companies offer matching 401(k) contributions, this essentially equates to free money. In other words, the employee can potentially reap the value of years of employer contributions in retirement.

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Not all companies offer 401(k) plans, however, or match employee contributions. This article explores three alternative retirement savings plans you can open if a 401(k) is not the right retirement savings plan for you.

1. Individual Retirement Accounts (IRAs)

IRAs are retirement savings plans that come in several different types. These include conduit or rollover, Roth, SEP, SIMPLE, and traditional.

IRAs are tax-advantageous investment tools for people wishing to save for retirement, though they do carry certain limitations. For example, if a retirement saver wishes to draw distributions before reaching the age of 59 1/2, they will usually incur significant penalties. This can include a 10 percent early withdrawal penalty. Additionally, it can trigger tax liabilities on distributions.

There are also limitations on the amount savers can contribute to their IRA annually. Contributions to IRAs are currently capped at $6,000 or less per year for retirement savers aged under 50. This rises to $7,000 per year for those aged 50 or older.

With traditional IRAs, investors must begin drawing minimum distributions from the age of 72. These distributions are based on account size and life expectancy. If account owners fail to draw minimum distributions when they reach this age, they may incur tax penalties of up to 50 percent of the distribution value.

2. Health Savings Accounts (HSAs)

It is easy for young, healthy individuals to underestimate their post-retirement health needs when they are just beginning their careers and starting to save for their retirement. However, in exchange for contributing to an HSA, savers receive a tax deduction today. Additionally, they gain tax-free interest or other earnings on their investments. HSA distributions are also non-taxable when savers use them to meet qualified medical expenses or post-retirement health needs.

The real benefit of HSAs comes when investors reach the age of 65. Beyond this threshold, non-medical distributions no longer incur a 20 percent tax penalty. This means that the plan effectively begins to function in much the same way as a traditional IRA. One important distinction is, unlike traditional IRAs, HSAs have no minimum required distribution.

In other words, although they were created to help US citizens pay for their health care though high-deductible health plans, HSAs can be used for much more than covering medical costs. HSAs moonlight as retirement savings platforms that provide significant value for individuals who retain capital in their accounts until reaching retirement.

Unfortunately, HSAs can be expensive to set up, with limited investment options. Additionally, as with IRAs, contributions are capped. As of 2020, the limit currently stands at $3,550 per year for individuals and $7,100 per year for families.

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3. Malta Pension Plans (MPPs)

Hailed by financial experts as the new, improved Roth IRA, Malta Pension Plans offer significant advantages over IRAs. These advantages include the ability to make unlimited contributions. Also, savers have the ability to invest non-cash assets, such as real estate. Finally, savers can draw penalty-free distributions from the age of 50.

MPPs are particularly useful for US taxpayers seeking a long-term tax deferral without complicated tax hurdles or contribution limitations.

Which Retirement Savings Plans Are Right for You?

Use the information we offer here to determine which retirement savings plans are right for you.