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Tax-Smart Ways to Save for Retirement Without a 401(k)

If you have freelance income, you can make tax-deductible contributions to a solo 401(k) of $17,500 plus 20% of net self-employment income.

My employer doesn’t offer a 401(k) plan. How can I save for retirement in addition to putting $5,500 per year in an IRA? --K.K., Arlington, Va.

If you’re married, your spouse can con­tribute up to $5,500 -- or $6,500, if 50 or older -- to an IRA (or you can contribute to a spousal IRA, if your spouse doesn’t work). And if you or your spouse has any freelance income, you can make tax-deductible contributions to a solo 401(k) of $17,500 plus 20% of net self-employment income, up to $52,000 (or $57,500 if 50 or older) or the amount of your freelance income for the year, whichever is less.

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If you have an eligible health insurance policy with at least a $1,250 deductible (or $2,500 for family coverage), you can contribute to a health savings account, which can be a great way to save for retirement, says Jerry Love, a CPA and personal financial specialist in Abilene, Texas. You can contribute up to $3,300 in 2014 if you have individual coverage, or $6,550 for family coverage (plus $1,000 if 55 or older). Contributions are tax-deductible (or pretax) and can be used tax-free for medical expenses in any year. But if you use other cash for health bills, you can keep the money growing in the HSA for medical expenses and Medicare premiums in retirement.

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You could also defer taxes by investing in a low-cost variable annuity (such as Fidelity’s), although withdrawals are taxed at your income tax rate. Or you can invest tax-efficiently in growth stocks or index funds. When you sell them, you’ll pay lower capital-gains rates on the profits.

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