Most retirement and financial advisors maintain that the average American worker must depend upon a three-legged financial stool when they retire. One leg consists of Social Security income, another is personal savings and the third is their company retirement plan, which is usually a 401(k) or 403(b) plan. However, many retirees either did not have a company-sponsored retirement plan like a 401(k) plan available, or were simply unable or unwilling to participate in them during their working years. (For related reading, also check out Retirement: Which Generations Are The Best Savers?)

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Don't Panic
Although workers without a 401(k) plan to draw from face a very real handicap, all is not lost; it is still possible to walk on only two legs! However, those who are in this category will have fewer options at retirement than those who participated in their company retirement plans. There are paths available for those who only have personal and governmental funds available.

Work Longer
If you failed to defer a portion of your income into a 401(k) or 403(b) plan, then working for another five years can do wonders for your retirement savings. If you have quit your previous employer already, then this is the time to start a short-lived second career, perhaps in a field that you have always had an interest in, such as for a humanitarian cause or other hobby. But five more years of full-time work could allow you to sock away another $30,000 into a traditional or Roth IRA (5 years X $6,000, if you include the catch-up contribution).

If this money were to grow by 5% per year, then you could end up with over $33,000 by age 70, if you were planning to retire at 65. If you were to then allow this to continue growing at 5% for another five years, you would have over $42,000 by age 75. This would allow you to draw $500 per month for about the next 85 months, or seven years, until age 82.

For those who choose this path, there are a growing number of work-at-home jobs available in the customer service industry, such as for travel agencies and airlines. Some of these jobs even provide benefits-and a retirement plan that may have an employer-sponsored match.

Work Part-Time
If the thought of full-time work makes you ill, a part-time job may be easier to swallow. If you are willing to live off of your Social Security income for a few years, then you could achieve the same savings plan described above by divesting the majority of your earnings into an IRA. Many of the work-at-home jobs described previously are also available on a part-time basis.

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Maximize Your Assets
Be sure to invest any money you save at this point prudently. You will be depending upon this money to sustain you when you become too old to work, so be sure to place it in an investment vehicle that fits your risk tolerance and time horizon. A growth and income fund or similar investment might be a good choice here, or perhaps a variable annuity contract that offers a guaranteed income rider that provides a quality selection of aggressive subaccount options.

Live Low
Unless you happen to have substantial personal assets outside a company retirement plan, you will probably not be able to maintain the same standard of living as those who do. It may be necessary to own just one car, move to a smaller home or make other similar adjustments in your lifestyle. If your house has appreciated substantially, you may want to consider selling it and simply keeping the proceeds, as any gain is tax-free up to $250,000 for single persons and twice that for married couples. The proceeds could then be invested in a diversified portfolio and used to at least partially fund a modest rental dwelling.

The Bottom Line
Retiring without a 401(k) plan to draw from obviously limits your options for retirement, and most of those who face this dilemma will not be living the kind of lifestyle emulated by the financial media. However, there are still ways you can provide for yourself if you are willing make the necessary adjustments in your plans and expectations. For more information on retiring without a 401(k) plan, consult your retirement or financial advisor. (For additional reading, also see Top 6 Ways To Ruin Your Retirement.)

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