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Two part-time jobs, no benefits, want to save for retirement

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perdiempt
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Two part-time jobs, no benefits, want to save for retirement  Reply with quote  

What is the best way to save for retirement when I am not eligible for any employer-sponsored plan? I have a Roth IRA but I will need to save more than that to be able to retire. Is there some other way for me to get the sweet deal that people get when they invest pre-tax dollars into a 401(k)? It seems unfair that I cannot save pre-tax dollars and then I get taxed again on any gains made.
Post Mon Oct 27, 2014 7:07 am
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Wino
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If you can set up a self-employment job of some type, you can save in a solo 401K or SEP, both of which are similar to 401K or IRA plans, respectively. Other options for tax advantaged savings are Health Savings Accounts (if your insurance qualifies), or 529's (for tax deferred educational savings). All of these plans have heavy penalties if you withdraw the money early or use it for other than its intended purposes.

http://www.irs.gov/Retirement-Plans/One-Participant-401%28k%29-Plans

http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Simplified-Employee-Pension-Plan-%28SEP%29

http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Types-of-Retirement-Plans-1

There are probably others, but those are the first few that come to mind.
Post Mon Oct 27, 2014 8:59 am
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perdiempt
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Two part-time jobs, no benefits  Reply with quote  

Thank you for the reply. What types of retirement savings accounts are there for people who do not qualify for employer-sponsored plans like 401(k), HSA, etc. and who cannot set up a solo 401(k) or SEP due to being employed rather than self-employed? I am 40 and have been saving $1000/ month for the past few years. According to the retirement calculators, I need to be doing much more than that. I am behind on saving for retirement because I was prioritizing paying off student loan debt. Now debt-free except for mortgage debt. We set up a 529 plan for our child but we stopped contributing to it because people kept saying to focus on our own retirement first instead of education savings for our child. I need to know the most advantageous thing to do with my savings after maxing out the Roth IRA. Mostly I am investing in a target fund and it has done well so far. But then I will have to pay capital gains tax on the growth, right? Is there a way to have my retirement savings grow tax-deferred? Or is there a better strategy for saving and investing post-tax dollars?
Post Mon Oct 27, 2014 4:16 pm
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Wino
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Re: Two part-time jobs, no benefits  Reply with quote  

quote:
Originally posted by perdiempt
What types of retirement savings accounts are there for people who do not qualify for employer-sponsored plans like 401(k), HSA, etc. and who cannot set up a solo 401(k) or SEP due to being employed rather than self-employed?

There is nothing I can find. I have been looking, myself, because I'm in the same boat you're in, but for different reasons. The Roth you're in seems to be it. Your question/supposition about capital gains on your earnings is correct.

I am not a fan of the target accounts. I keep my money in only stocks, but in different funds. I have a lot of S&P500, total stock market, and dividend appreciation funds (a lot of overlap there with the S&P500). I have less in international and small caps. I don't like bonds because I really don't understand them, and never will, I've decided.

It is apparently very unusual to be employed, making enough to invest in retirement, and be working for a company that doesn't offer any plan. I suggest this because of the total lack of options for tax deferred investing or tax free growth for such folks (as you and I happen to be).
Post Mon Oct 27, 2014 6:34 pm
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blixet
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Variable annuities have a tax deferral feature, although they are not without their problems. Tax efficient equity index funds should work reasonably well over the long haul.

Information is more valuable sold than used – Fischer Black
Post Mon Oct 27, 2014 6:50 pm
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Wino
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quote:
Originally posted by blixet
Variable annuities have a tax deferral feature, although they are not without their problems. Tax efficient equity index funds should work reasonably well over the long haul.

More detail or a link, please?
Post Mon Oct 27, 2014 7:08 pm
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blixet
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For basic information on the tax efficiency of index investing:
https://personal.vanguard.com/us/insights/taxcenter/planning/tax-exempt-tax-efficient-funds

For more detail:
https://www.parametricportfolio.com/wp-content/uploads/2010/09/TaxEfficient-Investing-Theory-and-Practice_2010_New.pdf

Basic info on VAs:
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/FPRA_White_Paper.pdf

Fleshing out more of the downside:
http://www.efficientfrontier.com/ef/701/annuity.htm

Of course, this is all about using after tax money. Tax planning can be very complicated and highly assumption dependent yielding a distribution of possible future outcomes.

Information is more valuable sold than used – Fischer Black
Post Mon Oct 27, 2014 10:30 pm
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perdiempt
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Thank you  Reply with quote  

Thank you both for the thoughtful replies.
Post Tue Oct 28, 2014 5:36 am
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perdiempt
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Annuities  Reply with quote  

The links you posted about annuities and tax-efficient equity index funds were helpful, but I needed to understand the concept of annuities on a more basic level. In case others are interested:
http://www.schwab.com/public/schwab/resource_center/expert_insight/ask_carrie/retirement/should_you_consider_an_annuity.html
Post Fri Oct 31, 2014 12:34 am
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