4 alternatives for when your 401(k) doesn’t cut it

There’s a finite list of things you can change at work — and your employer’s less-than-stellar retirement plan probably isn’t among them.

What makes for a lousy 401(k) is somewhat in the eye of the beholder, but characteristics may include limited offerings, high fees or no company match. The following four alternatives can ensure your employer’s retirement plan (or lack thereof) doesn’t derail your plans for retirement.

• Open an IRA. An individual retirement account, either Roth or traditional, provides comparable tax benefits to a 401(k), but with a broader array of assets and generally lower associated fees.

Exchange-traded funds, the darlings of the investment world, aren’t offered in most 401(k) plans, according to the Investment Company Institute trade group, but with an IRA you’ll gain access to them, along with stocks, options and bonds. Most employer-sponsored plans are confined to mutual or index funds.

There’s one major downside of IRAs They carry a lower maximum contribution threshold for tax-benefit purposes than a 401(k): $5,500 versus $18,500 for workers under age 50. The limits increase to $6,500 and $24,500, respectively, for people 50 and older. Roth IRAs have income eligibility limits, but traditional IRAs don’t. The main difference is when you’re taxed: now with a Roth, upon distributions with a traditional.

• Open a taxable brokerage account. These accounts serve the needs of long-term investors and are a good alternative to a conventional retirement account, especially if you’re looking to invest more than the $5,500 allowed for IRAs. As with IRAs, you’ll have access to a broader array of investments than most employer plans, along with discretion over what associated fees you’ll pay. But there’s a significant disadvantage: There’s no tax break on contributions, so investments are made only after Uncle Sam takes his bite, and earnings will be subject to taxes, too. The IRS imposes no limits on the amount of money you can set aside. For buy-and-hold investors, you’ll only be taxed at long-term capital gains tax rate.
• Get creative. Even if you have a perfectly fine 401(k), there’s good reason to pad your retirement nest egg with other accounts, but make sure you qualify and follow the relevant rules.

Got a profitable side gig? Consider a SEP (simplified employment pension) IRA, which is for business owners or self-employed workers. These accounts carry a higher contribution limit in theory — a whopping $55,000 for 2018 — but that’s if you’re making a lot of money. Otherwise, the amount can’t exceed 25 percent of your compensation.

Does your insurance provider offer a health savings account? Good news: Money not used for medical expenses can be withdrawn after age 65 and used for any purposes without penalty; earnings and interest will be taxed as income.