Some exciting changes are coming to Honest Dollar. Goldman Sachs will soon be your new broker-dealer. Learn more about this change.

Some exciting changes are coming to Honest Dollar. Goldman Sachs will soon be your new broker-dealer. Learn more about this change.

No 401(k) at Work? Consider an IRA

If you work for a company that doesn’t offer a 401(k) or workplace retirement plan, there are other attractive options to save for later in life. A Traditional or Roth Individual Retirement Account (IRA) could be a good fit.

Investing in an IRA can be easy

An IRA is a retirement account you can sign up for yourself, so you aren’t limited to what an employer offers. You can find some IRA offerings in the marketplace which require only a small, or even no, minimum contribution to open an account. If you want to invest in financial markets, you can do that without having to select individual securities such as stocks and bonds. It’s possible to get a broadly diversified portfolio by investing in a professionally managed account or a target-date mutual fund that spreads your money across stock and bond markets.

It’s generally best to start saving for retirement as soon as possible, even if you start small. The younger you are the more years you’ll have for the power of compounding to potentially help your account grow. For 2020 and 2021, the maximum contribution to an IRA is $6,000 if you are younger than 50 or $7,000 if you will be 50 or older at year-end.

You may get a tax benefit too

IRAs have potential tax benefits that can make them attractive for building a nest egg for retirement. Traditional and Roth IRAs are the two primary types of IRAs.

With a Traditional IRA, your contributions may be tax-deductible today, potentially saving you money on your taxes. Your money can grow tax-deferred until withdrawn in retirement.

If you are unmarried and your employer doesn’t offer a retirement plan, you are eligible to deduct a Traditional IRA contribution. The same is true if you are married filing a joint tax return and neither you nor your spouse has access to an employer-sponsored retirement plan. If you don’t have a workplace plan but you file jointly with a spouse who does, you can deduct a Traditional IRA contribution if your income is below certain levels. See our tips and this IRS fact sheet for more information.

With a Roth IRA, you contribute after-tax dollars today, and your withdrawals in retirement are tax-free. You are eligible to contribute to a Roth if your income is below certain levels.

If you qualify for both a deductible Traditional IRA contribution and a Roth IRA, consider your circumstances in deciding which to select. See Traditional or Roth IRA: Some Things to Consider When Choosing.

Understand the rules about withdrawals

The tax laws include rules about when you can withdraw money. Since IRAs are designed specifically for retirement saving, withdrawals before age 59½ may be subject to a 10% IRS penalty in addition to any tax you may owe. You can read about IRA distribution rules on the IRS website.

Because of potential early withdrawal penalties, you should avoid contributing money to an IRA that you need for ordinary living expenses and short-term financial obligations. You should also set money aside in an emergency fund for unexpected expenses to avoid having to dip into your IRA before retirement.


At Honest Dollar by Goldman SachsTM, individuals can easily open a Traditional, Roth or SEP IRA and get access to diversified investment portfolios constructed by the Goldman Sachs’ Investment Strategy Group.

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