Planning for Retirement Without a 401(k)

About half of Americans don't have a 401(k) or pension.

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In an ironic twist, employees with a 401(k) plan are also the most likely to save money for retirement outside of work. Some 66 percent of workers with a 401(k) are also saving for retirement in an IRA, mutual fund, or bank account, compared to 57 percent of workers without a 401(k). "Once people join a plan they become engaged and invested in that plan. They are more likely to think about how much they need to save," explains Catherine Collinson, president of the Transamerica Center for Retirement Studies. "Becoming part of the plan is developing a mindset about saving and managing savings."

People without employer-sponsored retirement accounts generally set more modest savings goals for themselves. The median worker without a 401(k) aims to save $500,000 before retiring, compared to $800,000 among those with 401(k)s, Transamerica found. Employees with a retirement account through their job typically expect their 401(k), 403(b), or IRA accounts to be their primary source of income during retirement. Those without a 401(k) generally expect Social Security to be their largest source of income after retirement.

[See 21 Ways to Cut Expenses in Retirement.]

However, even workers with 401(k)s aren't feeling particularly optimistic about their ability to retire. Just over half (53 percent) of workers with a 401(k) plan say they feel confident about their ability to retire comfortably compared to 43 percent of their 401(k)-less counterparts. Majorities of workers with and without a 401(k) agree that they could work until age 65 and still not have enough money to meet their retirement needs (66 percent and 73 percent respectively). About 47 percent of workers without a 401(k) think they will need to work until age 70 or later or never retire, compared to 37 percent of employees with 401(k)s.

Retirement is a very distant dream for Elizabeth Tucker, 25, a personal assistant in New York. She hasn't ever participated in any sort of retirement plan and her current position doesn't offer a 401(k) or pension. Rent for her one-bedroom apartment, utilities, and $400 a month student loan payments easily consume her entire paychecks. "I would love to save and be thinking about my future and a family and relaxing at some point in my life," Tucker says. "It's just so hard to get in that mindset when you are still working on last month's rent and student loans."