No 401(k) at Work? Why You Might Want to Consider an IRA

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What we’ll cover:

If you work for a company that doesn’t offer a 401(k) or workplace retirement plan, don’t worry – you still have options when it comes to saving for retirement. 

You may have heard of Traditional and Roth Individual Retirement Accounts (IRAs), which are two popular choices for people looking to build a nest egg for their golden years.

Traditional and Roth accounts each come with different contribution, withdrawal and tax rules. Depending on your financial situation, one type of account may be a better fit than the other.

But did you know you may be able to open both a Traditional and Roth account if you meet certain qualifications?

If you do have access to a 401(k) plan, this article is for you, too, because you could open an IRA in addition to your workplace plan, which could help you stash away even more for retirement.

Read on to learn about the basics of opening an IRA and see how it could help you reach your retirement goals. 

Opening an IRA

You can sign up for an account through an IRA provider, typically a bank or brokerage firm. Each will have their own terms and conditions for opening an account.

Some require a small minimum contribution, while others have no minimum contribution requirements. It’s a good idea to do a little research to compare your options before you set up your account. 

With an IRA, you can invest in securities like stocks and bonds without having to personally select each one. It’s possible to get a broadly diversified portfolio by investing through a professionally managed account that spreads your money across various stock and bond markets. 

This is important because diversification is one way to help you manage market risks when it comes to investing.


People who do not have access to a workplace retirement plan can use an IRA to help build a nice nest egg for their golden years.


Once you get an IRA up and running, you’ll want to chip in money on a regular basis. Making retirement contributions consistently is a key to building financial security, and the sooner you’re able to start, the better. That’s because the power of compounding could help grow your retirement savings the longer you can stay invested.

Contributing to an IRA doesn’t have to be something you have to remember to do regularly on your own. Many accounts have an automatic contributions feature that allows you to set up recurring deposits from your checking account.

For instance, some people choose to have their automatic deposits occur on payday – that way, a portion of their pay goes straight into their retirement funds without having to lift a finger. 

Good to know: There are annual limits to how much you can contribute to your IRA(s). For the most up-to-date contribution limits, visit the IRS.

Interested in learning more about the difference between Traditional and Roth IRAs? Check out our article here, which highlights some things to consider if you're deciding between the two.

There are some potential tax benefits, too

You may have heard Traditional and Roth IRAs being referred to as “tax-advantaged” accounts. This simply means that they offer certain tax advantages that could help your savings to potentially grow tax-deferred or tax-free over time. 

Traditional IRA. With a Traditional IRA, your retirement money can potentially grow tax-deferred – that is, you won’t have to pay taxes on it until you take out the money in retirement. Now you may be wondering what’s so great about being able to defer taxes. The thinking goes like this: Many retirees may find themselves in a lower tax bracket because they’re not working anymore. When they need to take out money in retirement, the idea is that the withdrawals may be taxed at a lower rate.

The other potential tax benefit is that your contributions might be tax-deductible when you file your taxes. If you’re not married, and your employer doesn’t offer a workplace retirement plan, you may be eligible to deduct your contributions (up to a certain dollar amount). The same may be true if you’re married filing jointly and neither you nor your spouse has access to an employer-sponsored retirement plan. (If your spouse does have a workplace plan, you might still be able to deduct if your income is below certain levels.) Visit this IRS webpage for more information.

Roth IRA. Unlike a Traditional IRA, Roth IRA contributions are not deductible, but you won’t have to pay taxes on your withdrawals in retirement as long as certain conditions are met. That’s because with a Roth IRA, you contribute money that you’ve already paid taxes on (“after-tax dollars”). Keep in mind, however, that not everyone can open a Roth account – you’re eligible to contribute only if your income is below certain levels. The IRS updates this information each year here.

The bottom line: From a tax perspective, is one account better than the other? That’s hard to say as everyone’s financial and tax situations are different, but here’s what to keep in mind as you scope out the options: 

  • With Traditional IRAs, your contributions may be tax-deductible in the year that you make them, and your retirement money could grow tax deferred, meaning you don’t have to pay taxes on it until you withdraw.
  • With Roth IRAs, while contributions are not tax deductible, your retirement money could grow tax-free, meaning tax-free withdrawals in retirement.

IRAs have rules about withdrawals

Since IRAs are designed specifically for retirement saving, ideally, you wouldn’t want to dip into your IRA before retirement. While you may take out your money at any time (which can be tempting), there are certain withdrawal rules (e.g., penalties and taxes) to be aware of. 

Whether your withdrawal is subject to penalties and taxes depends largely on the type of account you have as well as when and why you’re taking the money out.


You may want to consult a professional tax advisor to understand what rules may be applicable for your particular situation.


Generally speaking, if you pull out the funds before age 59 ½ (which is considered an “early withdrawal”), you may be subject to a 10% penalty in addition to any taxes you may owe on the withdrawal. However, exceptions may apply.

Certain withdrawals, known as “qualified distributions,” from Roth IRAs could be tax- and penalty-free if you meet specific conditions. For example, if you’ve had the Roth account for at least five years, a withdrawal is considered to be a qualified distribution if you meet one of the following conditions : 

  • You’re age 59 ½ or older.
  • You’re totally and permanently disabled. 
  • You use the funds to make a qualified first-time home purchase (up to $10,000 lifetime limit). 
  • The funds are distributed to your beneficiary or estate as a result of your death.

For more details on Roth IRA distribution rules, see IRS Publication 590-B.

When it comes to Traditional IRAs, you may be able to avoid the 10% early withdrawal penalty if you’re in one of the following situations :

  • You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
  • You are totally and permanently disabled.
  • You are terminally ill.
  • You are the beneficiary of a deceased IRA owner.
  • You use the distributions to buy, build, or rebuild a first home.
  • The distribution is for your qualified higher education expenses.

For the full list of exceptions and more infromation on Traditional IRA withdrawal rules, visit the IRS. You may also want to consult a professional tax advisor to understand what rules may be applicable for your particular situation.

A recap

People who do not have access to a workplace retirement plan could use an IRA to help build a nice nest egg for their golden years. Even if you do have a 401(k) plan, adding an IRA could help you put even more away for retirement. 

If you’re considering opening an IRA, Traditional and Roth accounts are the two common types of retirement accounts you can choose from. Because each comes with their own eligibility, tax and withdrawal rules, it’s a good idea to do a little research to determine which type of account makes sense for you.

Whichever option you decide to go with, remember that regularly putting money into your IRA is key to achieving the retirement future you’ve always dreamed of.

This article is for informational purposes only and is not a substitute for individualized professional tax advice. Individuals should consult their own tax advisor for matters specific to their own taxes. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendations in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements of any information contained in this document and any liability therefore is expressly disclaimed.