Whether you have a 401(k) or not, it’s never a bad idea to save more for retirement.
IRS increases 401(k) contribution limits for 2026
The IRS will increase 401(k) and catch-up contribution limits for 2026, allowing workers to save up to $32,500 for retirement.
There are many reasons why you might be interested in building your retirement savings outside of a 401(k). Maybe your employer doesn’t offer a 401(k) plan, you’ve already maxed out your plan, or you don’t want to put all your eggs in one basket. Whatever the reason, a 401(k) isn’t the only way to invest your retirement funds.
Here’s a sampling of other smart ways to make sure you’re prepared for everything in retirement, from taxes to medical expenses.
1. Certificate of Deposit (CD)
CDs are savings products offered by banks and credit unions. If you want to shop for the best rate, you can easily find CDs at 4% or higher (as of May 2026). Here are some of the most attractive features associated with CDs.
- You get fixed interest rates and guaranteed returns.
- Insured by the FDIC or NCUA up to $250,000 per depositor and per institution.
- They typically offer higher interest rates than traditional savings accounts.
- Duration ranges from 3 months to 10 years, allowing you to decide how long you want your funds locked in.
- You can easily build a “CD ladder” by opening multiple accounts with staggered maturity dates. For example, you can open a CD with a period of 3 months and another CD with a period of 6 months. That way, you will have regular access to your funds.
- Most CDs have no maintenance fees.
- Interest can be compounded daily, monthly, or quarterly, all of which increase your overall profit.
2. Traditional Individual Retirement Account (IRA)
If you’re looking for a strong alternative to a 401(k), there’s nothing better than a traditional IRA. Here’s why:
- You can invest whether you’re self-employed, work for a small business, or just want to diversify beyond the plans offered by your employer.
- Contributions you make are tax deductible and may reduce your current taxable income.
- Similar to a 401(k), investment growth is tax deferred until retirement.
- These are a good option if you expect your taxes to be low in retirement.
- If you’re under 50, the contribution limit for 2026 is $7,500. If you’re 50 or older, you can add an additional $1,100 contribution for a total annual contribution of $8,600.
3. Health Savings Account (HSA)
“High-deductible health plan” (HDHP) may be the scariest term a newly insured person hears. However, if you have an HDHP, you may be eligible to open an HSA. Here’s how it can help you, even in retirement.
- There is a 3x tax benefit. Not only can you make tax-deductible contributions, but your account is tax-free and withdrawals for medical expenses are also tax-free.
- Once you reach age 65, you can withdraw your funds for any purpose. If you use these funds for medical expenses, you will not pay taxes on the amount you withdraw. Non-medical expenses are taxed as ordinary income.
- There is no need to do a bare minimum distribution.
When preparing for retirement, it’s a good idea to gather your options and understand each option. The goal is to invest your hard-earned money where it has the most potential for growth and provide you with the retirement you desire.
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