Is it possible to retire a millionaire without having a 401(k) plan? It’s true that a 401(k) can be an extremely powerful tool for fueling your retirement savings efforts. However, research from Pew Charitable Trusts shows that 42% of workers don’t have access to one through their employer. And, of the 58% that do, less than half are participating.       

If your goal is retiring a millionaire but saving in a 401(k) isn’t an option, you’ll need to work a little harder to hit your target. Fortunately, there are some savings alternatives you can use to grow a seven-figure retirement nest egg.

Start with an IRA

An individual retirement account (IRA) is one of the most obvious ways to sock away $1 million for retirement. A traditional IRA allows for tax-deductible contributions. Your withdrawals are taxed at your ordinary income rate in retirement.

A Roth IRA allows you to contribute after-tax dollars instead. You won’t get a deduction for your contributions, but you can make withdrawals tax free once you retire. For 2018, the annual contribution limit for both plans is $5,500, unchanged from 2017. You can add an additional $1,000 if you’re aged 50 or older. (For more, see Roth vs. Traditional IRA: Which Is Right For You?)   

So how can you bank $1 million with an IRA? It’s actually pretty simple. Start early and save consistently. Someone who saves $5,500 a year in a Roth IRA beginning at age 25 would have $1.1 million saved by age 65, assuming a 7% annual rate of return. Waiting until 35 to start saving, on the other hand, would chop that balance down to $555,000 and change. 


How Can Investors Pay their Future-Selves?

Get a Health Savings Account

If you don’t think you can get to $1 million just by saving in an IRA alone, a health savings account (HSA) is an undercover way to boost your retirement savings. While these accounts are designed to be used for healthcare expenses, they can be a valuable source of income once you retire.

Contributions to an HSA are deductible, even if you don’t itemize. For 2018, someone with individual coverage in a high-deductible health insurance plan could chip in $3,450. The limit for family coverage is $6,900. At age 55 and older, there's a $1,000 increase in 2018. So how does that add to your retirement savings? Surprisingly, more than you might think if you manage to stay healthy.   

For example, let’s say you have individual coverage and contribute the full $3,450 each year. You have $300 in medical expenses annually and fund your HSA for 30 years. At a 5% rate of return, you’d have over $233,000 to add to the retirement pile. If you have a family plan you can increase your annual savings to the maximum of $6,900. With a family you might have annual medical expenses of $600. At the same 5% rate of return, your account would grow to more than $466,000 in 30 years.  

You can withdraw money from an HSA tax free and penalty free for medical expenses. What you may not know is that in retirement you can also withdraw money for things other than healthcare without incurring a tax penalty. Once you hit 65 you can use HSA funds for any reason. You just pay ordinary income tax on those distributions. (For more, see How to Use Your HSA for Retirement.)  

Consider a Taxable Investment Account

If you max out an IRA and an HSA, a taxable investment account is another option to consider. While these accounts don’t offer any tax advantages, such as deductible contributions or tax-free growth, you have a shot at earning better returns than you would by parking your extra cash in a regular savings account.

You can save as little or as much as you like in a taxable account and invest in things such as stocks, bonds, mutual funds, exchange-traded funds (ETFs) and real estate investment trusts (REITs). Just remember that any earnings from these investments will be subject to the capital gains tax. If you’re planning to buy and hold investments, you’ll need to plan ahead for how that could affect your tax liability in retirement.

The Bottom Line

Not having access to a 401(k) is something of a setback, but it doesn't mean that you can’t retire a millionaire. Taking advantage of other savings and investment plans can keep you on track to enjoying the kind of retirement you want. Just make sure that you understand the rules with regard to how much you can save and how your contributions will be taxed down the line.