How Should I Invest Outside of a 401(k)?

Summary

Podcast Summary: Ramsey Everyday Millionaires

Episode: How Should I Invest Outside of a 401(k)?
Date: November 17, 2025
Hosts Featured: Dave Ramsey, Chris Hogan
Caller: Jay from Anchorage, Alaska

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Overview

This episode tackles a nuanced question—what should high-income earners do when they're no longer eligible for a traditional company 401(k)? Through Jay’s real-life scenario, hosts Dave Ramsey and Chris Hogan explore alternative investment options, the pitfalls of unqualified plans, and broader advice for maximizing retirement savings outside of standard workplace offerings. The tone is practical, encouraging listeners to seek tailored investment guidance and remain vigilant about the true value and growth potential of available plans.

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Key Discussion Points & Insights

1. Caller’s Situation: Losing 401(k) Eligibility

• [00:19-00:58]
  • Jay explains he received a promotion, which in turn disqualifies him from participating in his company’s 401(k) due to a compensation threshold.
  • The company offers an alternative: a pre-tax, unqualified retirement plan with a small match, mainly invested in bond funds.
  • Jay voices concern about the plan’s unfunded nature and low returns (~5%).

2. Assessment of Unqualified Plans and Bond-Focused Investments

• [00:58-01:36]

  • Dave and Chris probe details on the plan’s returns and structure.
  • Chris Hogan shares skepticism about the 5% bond fund return, suggesting it’s not an optimal growth vehicle for retirement assets.
  • Notably, both hosts express hesitancy toward unfunded, unqualified plans and limited-growth investments like bonds.

  Chris Hogan [01:34]: “That’s not very good.”

3. Alternative Investment Options

• [01:36-02:18]

  • Chris recommends considering a backdoor Roth IRA if income precludes standard Roth contributions.
  • Both hosts advocate for consulting with a SmartVestor Pro for deeper guidance and exploring vehicles like index funds and mutual funds for superior long-term growth compared to bonds, even accounting for capital gains taxes on withdrawal.

  Chris Hogan [01:55]: “It’s going to be a better growth rate.”
  Dave Ramsey [02:00]: “Even from index funds to mutual funds, you’ll get a better rate of return just doing something like that.”

4. Income Thresholds and Roth IRA Eligibility

• [02:22-02:28]

  • Jay’s salary ($165K base, up to $250K with bonuses) triggers a clarification—he may still be eligible for a standard Roth IRA, which Dave strongly recommends maximizing.

  Dave Ramsey [02:28]: “I think you’ll still qualify for a traditional Roth IRA at that range. So I would definitely be funding that.”

5. Company Match: Is It Worth It?

• [02:51-03:03]

  • Jay shares specifics: company matches 50% of the first 6%.
  • Hosts acknowledge the draw of “free money,” but remain wary, reiterating the poor overall return from the bond fund-heavy plan.

  Dave Ramsey [02:56]: “It’s hard because it’s free money coming from the company. Right?”
  Chris Hogan [03:01]: “5% is…”

6. Final Recommendations and Broader Advice

• [03:10-04:13]

  • Both hosts maintain that Jay (and listeners in similar situations) will be better off investing independently via Roth IRAs, index funds, and mutual funds.
  • Dave cautions that investment advice isn’t “one-size-fits-all”—consulting with a professional is crucial due to the complexities of changing employer offerings.
  • Discussion broadens: more companies are now offering Roth 401(k)s, and the investment landscape is evolving.
  • Both hosts agree: Bonds, even as you age, often don’t justify their limited growth compared to diversified mutual funds.

  Dave Ramsey [03:15]: “I always hate giving blanket investing advice… There are some ins and outs.”
  Chris Hogan [03:46]: “Good on him for looking deeper and seeing what those investments are…”

  Dave Ramsey [04:13]: “I’m just never a fan of bonds… Even as you get older, I just don’t think it’s worth the limited growth.”

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Notable Quotes & Memorable Moments

• Chris Hogan [01:34]: “That’s not very good.”
• Dave Ramsey [02:00]: “Even from index funds to mutual funds, you’ll get a better rate of return just doing something like that.”
• Dave Ramsey [02:28]: “I think you’ll still qualify for a traditional Roth IRA at that range. So I would definitely be funding that.”
• Dave Ramsey [03:15]: “I always hate giving blanket investing advice… There are some ins and outs and different employers are offering different things.”
• Dave Ramsey [04:13]: “I’m just never a fan of bonds… Even as you get older, I just don’t think it’s worth the limited growth.”
• Chris Hogan [03:46]: “Good on him for looking deeper and seeing what those investments are and what their track record have been at as opposed to just saying this looks good. I’ll check the box. Right.”

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Important Timestamps

• [00:14-00:58] Jay describes his promotion, losing 401(k) access, and the new unqualified plan.
• [01:34] Chris Hogan voices skepticism about 5% bond returns.
• [01:36-02:18] Alternatives discussed: Roth/backdoor Roth IRAs, index/mutual funds.
• [02:22-02:28] Jay shares income; Dave clarifies Roth IRA eligibility.
• [02:51-03:03] Company match specifics and the hosts’ calculus on whether it’s worthwhile.
• [03:10-04:13] Hosts’ final advice, focus on professional guidance, and anti-bond growth philosophy.

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Conclusion & Actionable Advice

• Max Out Your Roth IRA: Even high earners may still be eligible, so fund it to the limit.
• Be Skeptical of Bond-Focused, Unqualified Plans: They often offer limited return and insufficient long-term growth for retirement savings.
• Consult a Pro: Personalized advice is critical, particularly amid evolving employer plan options.
• Know Your Investments: Don’t just check the box—understand the underlying assets and expected return.
• Aim for Growth: Index and mutual funds typically provide better returns than bonds, regardless of age.

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This episode emphasizes the importance of understanding your investment options beyond the traditional 401(k)—especially when your compensation changes your eligibility. The core message is clear: prioritize higher-growth vehicles, get professional advice, and never assume the “company plan” is the best or only path for retirement savings.

Transcript

[Jay]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor all right, up next.

[Dave Ramsey]

We have Jay in Anchorage, Alaska. Hey, Jay, welcome to the show.

[Jay]

Thank you for taking my call.

[Dave Ramsey]

How can we help?

[Jay]

Yeah, so I just received a promotion at work and the new compensation package makes me ineligible to contribute to the company 401k plan. So they've offered a different plan, pre tax dollars, a small match, but it's unqualified. And I'm curious what your thoughts are on unqualified plans and if this is the right.

[Dave Ramsey]

Yeah. I'm curious why you're not able to contribute to the 401k because you chose a different package for a benefit. For your benefits.

[Jay]

No, they have told me that if the compensation exceeds a certain amount, the plan is not able to be contributed to.

[Dave Ramsey]

Oh, got it. Okay.

[Chris Hogan]

So are you a very high earner?

[Jay]

Evidently. So. So I can't. Yeah. So I can't contribute to the 401k anymore.

[Chris Hogan]

So explain to us what your options are again.

[Jay]

Sure. So they've offered a different retirement plan, pre tax dollars, a small company match, but it's unqualified. So it's unfunded. That gives me pause. And I'm curious what your thoughts are on those types of plans and should I contribute?

[Dave Ramsey]

What are they invested in?

[Jay]

Do you know the rate of return is based on a specific bond fund? I don't have that in front of me recently. In the last year is about 5%.

[Chris Hogan]

That's not very good.

[Jay]

That's what I thought.

[Chris Hogan]

I mean, if I were you, my guess is you're not able to just do a traditional Roth ira. But I might start with backdoor Roth ira and I might ask a smartvestor pro what my. What other better options there are? Because I wouldn't want to be investing primarily in bond funds.

[Dave Ramsey]

No. And considering it's, you know, is it pre or post tax?

[Jay]

It is pre tax.

[Dave Ramsey]

It's pre tax. Okay. So, yeah, So I would probably. I think you're going to be better off and again, talk to a smart investor pro. But when you actually look at everything, I mean, even from index funds to mutual funds, you'll get a better rate of return just doing something like that. Even though you'll have to pay capital gains when you take pull the money out, that's still.

[Chris Hogan]

It's going to be a better growth rate.

[Dave Ramsey]

Yeah, absolutely. But yeah. How much, how much do you make a year?

[Jay]

So the new compensation package base is 165 with potential up to 250.

[Dave Ramsey]

Okay. I think you'll still qualify for a traditional Roth IRA at that range. So I would definitely be funding that. You can fund up to $7,000 in that, but I would do that 100% and then I would probably just look at index funds or mutual funds. Beyond that, it's not retirement and you're not getting that match. But I. How much are they matching? What percentage it is?

[Jay]

50% of the first 6%.

[Dave Ramsey]

50% of the first six. Okay.

[Chris Hogan]

Interesting way.

[Dave Ramsey]

Okay. It's hard because it's free money coming from the company. Right. But again, your rate of return, I just think that you could.

[Chris Hogan]

5% is.

[Dave Ramsey]

I think you could still. I think you'll end up. Yeah, I think you'll end up better just doing it on your own versus putting money into this.

[Jay]

That was my thought, but I was just looking for a second opinion. Thanks for all your info.

[Dave Ramsey]

Yeah, absolutely. Jay, thanks for calling. Yeah, I would do that. But then definitely, you know, sitting down with the Smartvestor Pro is always what we're going to recommend. I always, yeah. Hate giving blanket investing advice, you know, in a three minute call because there are some ins and outs and different employers are offering different things. I mean the amount of changes that's occurred with retirement funds within companies in America even over the last 10 years, you know, companies offering now, Roth 401.

[Chris Hogan]

Yes.

[Dave Ramsey]

It's up by 20% versus what they were offering even five years ago. So.

[Chris Hogan]

But good on him for looking deeper and seeing what those investments are and what their track record have been at as opposed to just saying this looks good. I'll check the box. Right.

[Dave Ramsey]

Yes, absolutely. Yeah. Digging into that and looking at those numbers. But yeah, so yeah, I would get with the Smartvestor Pro J, double check all of that. But that's my knee jerk reaction for sure is because when you look at all of these and the older people get, there are financial advisors out there that start to recommend more conservative funds.

[Chris Hogan]

That's true.

[Dave Ramsey]

Like bonds and all of that. But still I think even then it's advice you want to look at because to, because I think on the flip side, when you're still in quote unquote, riskier, which isn't mutual funds aren't even that risky, you're still going to get a better rate of return. I'm just never a fan of bonds is what I'm trying to say. Even as you get older, I just don't think that it's worth the limited growth. So thanks again for the call, Jay.