401(k) Alternatives

People who work can hopefully afford to retire someday. Retiring isn’t a dream, it’s a goal. It takes effort, research, savings, researching, options, maybe even a loophole (a legal one). As the retirement age goes up and programs that support retirees are in peril, having to work forever is a valid fear.

401(k)s, which for the most part replaced pensions, are becoming obsolete in the 21st century. IRAs, Roth IRAs, SEP IRAs, nondeductible IRAs, spousal IRAs, simple IRAs, and self-directed IRAs can help to fill the void. But the rules and regulations, especially regarding how much you can contribute per year despite the tax benefits, can be hampering.

For IRAs, the limit you can contribute per year is only $5,500. Roth IRAs let you contribute $1,000 more. SEP IRAs and self-directed IRAs are a little less restrictive, but only open to the self-employed, business owners, and freelancers. For spousal IRAs, you need to be someone’s spouse. You also have to research who can be trusted to manage them.  Financial planners and certified financial planners are two different people.

Ownership also changes depending on your marital situation. IRAs can be considered communal property depending on the state and how good your lawyer is. If a working spouse leaves a non-working or lower-earning spouse, it’s harder to build up a spousal IRA.

Managing extra savings accounts that act as padding is a lot of work at any age. Then you might find hidden fees. Not knowing makes retiring hard. Current systems don’t always make the process straightforward.

Luckily, the retirement landscape is changing. A Payroll deduction IRA is designed for ease and simplicity. You don’t have to worry about gimmicks or hidden fees, and the best options for you are built in.

For employers

A payroll deduction IRA does all the work for the employer. The small monthly maintenance fee makes up for employer contributions. The company administering the IRAs train voluntary enrollees for you. And employees are 15 times more likely to save for retirement by a company implementing a plan, not making it mandatory.

ERISA laws do not apply to payroll deduction IRAs, but it’s still very legal. Verified experts manage all the investments, which are high yield and low risk. Using behavioral-finance principles, the employees save and earn more faster.

For employees

Anyone is eligible to enroll, and enrolling is automated. Employee don’t need to attend meetings or sign papers, and the process takes only minutes to start. Unlike traditional 401(k), it’s transferable. There is some investment and vetting, but once you’re in, the bank, insurance company, or financial institution can answer any questions about your plan.

Starting an account

Starting an account for your employees takes five minutes online. After answering a few important questions about your company, such as contact info and payroll info, and you’re enrolled. Your information will remain private and safe. The personal and contact details of your employees are left out of the process.

Your account should be activated in five to seven days. You will be promptly informed when you’re activated. It is up to you to notify your employees. The financial institution will provide the necessary information and training materials.

Any size business can open an account. No employees can be denied the chance to be involved in the program.

Retiring isn’t easy. It takes a lot of work to gain the chance to no longer have to work. But this kind of IRA makes the process simpler, and keeps the government out of it. A payroll deduction IRA is the 401(k) for the modern day, and considering it for your company makes sense.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.