Finding Benefits Without an Employer
by James Winslow, Vice President, United Investment Services, LPL Financial Advisor
Although employment trends have improved recently, there remain millions of people who work part time, are employed in temporary jobs, or are self-employed, frequently without employer-sponsored benefits.1 This situation presents a challenge when planning for retirement, health insurance, and other areas. But with careful planning, you may be able to continue investing for your later years, paying for medical expenses, and making progress in other areas of your financial life.
If you find yourself without employer-sponsored insurance, consider whether you may be able to explore the following options. Keep in mind that your health status and your age will influence whether certain plans are available to you and how much you will pay. Regardless of where you obtain insurance, you are likely to pay more when compared with an employer-sponsored plan and your coverage may be less comprehensive.
- Arrange to go on a partner's plan if you are in a long-term relationship. Increasingly, coverage is made available to unmarried partners as well as to spouses.
- Explore whether your state makes a plan available to individuals who meet certain qualifications, such as income thresholds.
- If you are a union member, contact your union to find out about medical insurance options.
- www.aarp.com/health/health-insurance presents insurance options and potential discounts on medical services for members aged 50 and older. Note that the insurance products are not available in all states.
- If you are self-employed, consider joining a chamber of commerce or other business organization that offers a group plan to members.
You can continue investing for retirement even if you do not have access to an employer-sponsored plan.
- Maintain an IRA. The maximum annual contribution is $5,500, plus an additional $1,000 for those aged 50 and older. Anyone with earned income can contribute to a traditional IRA. But you must begin taking required minimum distributions (RMDs), which are taxable, after age 70½. To contribute to a Roth IRA, you are required to meet income thresholds established by the IRS, but RMDs are not mandatory.2
- When launching a small business, such as yourself and one other employee, consider contacting a financial advisor who markets independent 401(k) plans. This strategy may help you stay on track when building a retirement nest egg.
- Review assets in retirement plans you may have with former employers. When deciding how to manage these assets, be sure you understand the rules associated with the plan. By law, you are able to roll over assets from a 401(k) plan to a rollover IRA. A direct rollover, in which the money goes directly to the firm managing the rollover IRA, preserves the tax-deferred status of your assets. Try to avoid a nonqualified withdrawal, which is taxable and may impact your ability to save for retirement. Rules associated with a defined benefit plan, such as a pension, may differ.
You may have to do a bit of research to find medical and retirement benefits that are suitable for your situation. With some legwork, you may encounter success.
1Source: The Wall Street Journal, "Benefits Without the Boss," January 14, 2012.
2Restrictions, penalties, and taxes may apply. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.