If my employer has a retirement program that is *not* a 401(k), should I/can I invest in one of my own?

Question

My employer does not use the common 401(k) retirement program - they are a state employer and use a different but similar State retirement program, along with a deferred compensation program that uses Roth investments.

I'm not terribly familiar with the terms of a 401(k) program, but if my employer doesn't have one, would I be allowed to (and encouraged to) start one of my own?

Note - I have no intention of leaving my employer's retirement program - I simply wish to know if I could also invest in a 401(k) on my own, separate from my ongoing employer's program.

Answer 1

You can't start your own 401K unless you have a business. You can, however, contribute to an IRA.

There are 2 main types: Roth and Traditional, with a combined max of $5,500.

They both have their own benefits. With a Roth IRA, there is no pre-tax savings, but the account grows tax-free.

With a Traditional IRA, there are pre-tax savings, but the growth is taxed.

Roth IRA's typically make more sense to invest in, but ask your financial advisor.

If you do own a business, you will want to look into a SEP IRA.

Answer 2

A 401(k) can only be offered by a (private?) employer. Thus, while working for the State, you can't also contribute to a 401(k).

As DStanley mentioned, though, you can -- and should, after maxing out your state plan contributions -- contribute to an IRA.

(Don't forget your Emergency Fund, though!!)