19 Jul How to save without a 401(k) plan

Q. I just graduated and I have a part-time job while I’m looking for a better one in my field. I want to save for retirement but I’m not sure what I can or should do since I don’t have a 401(k) yet. Any suggestions? I like the idea of the money coming out of my check each week but I don’t have that option.
— New grad

A. You don’t need to have a 401(k) to save for retirement.

Think about starting with an IRA.

Ask your employer if you can have automatic deductions taken from your paycheck and sent to an IRA, said Paul Criscione, a certified financial planner with Freedom Capital Management in Colts Neck.

If yes, you can set up an IRA – either a traditional or Roth IRA – with a financial institution and authorize a payroll deduction amount for it.

“Your employer will send pre- or after-tax contributions to the institution as per your instruction,” Criscione said. “The financial institution you select will hold custody of the assets that you can invest in stocks, bonds, mutual funds, savings accounts and other similar types of investments.”

You will control where your money is invested and you also bear the investment risk, Criscione said.

You should also be aware that your employer does not guarantee or promise any rate of return, he said.

“The employer may pay fees charged by the IRA provider for services in connection with establishing and operating the payroll deduction process,” he said. “However, you may have to pay the fees related to setting up and maintaining the IRA.”

And, you will always be 100 percent vested in your contributions to the account, Criscione said.

Considering your age, it might be best to focus on making a contribution to a Roth IRA regardless of your employer’s ability to set up a payroll deduction plan.

“When you’re just starting out, it makes more sense to pay taxes now and let your after-tax contributions compound in your Roth IRA over the life of your career,” he said. “After age 59 1/2 years old, qualified withdrawals from a Roth IRA are free from federal taxation. It’s a great deal.”

Criscione said it can be easy to set up automatic withdrawals from your local bank directly into your Roth account.

Also note that annual contributions cannot exceed $5,500 or your gross earned income, whichever is less.

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