What to Do When Your Company Stop Matching Your 401K
Written by Cathy
This has been a rough year for almost every company out there. Every company has to do banking, so even if they aren’t a publicly traded company, they are feeling the pinch.
My employer planned to expand their 401K plan for this year. They sent a letter on Monday regretting that they would not be able to go through with it, and are stopping matching contributions for the remainder of the year.
I’m adjusting my contribution amounts accordingly. Once they stop matching, I will put more money to max my Roth IRA instead. Once my Roth IRA is fully funded, then I contribute back to my 401K, without the match.
Why? Because it is still tax advantaged. I still benefit from the pre-tax deduction on my paycheck. It is also good to have both a pre-tax and post-tax account for my retirement. Since I get the pre-tax deduction now, it is more advantageous to still contribute to my 401K rather than a regular savings account. This adds up to big savings.
The only thing that has really changed is the order in which I fund my accounts. It goes Health Savings Account –> Roth IRA –> 401K.
Did your employer drop matching contributions? How are you handling it?
4 Responses to “What to Do When Your Company Stop Matching Your 401K”
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Great article. I don’t think a lot of people understand Roth IRAs. I like these funds for the younger investor. You are right to put your 401K last in this case. Good job!
Elementary Finance: Thanks for your comment!
The way the economy is being rocked, I am hedging a bet that I will be taxed at a higher rate in the next couple of decades. The Roth IRA is the best place to park my retirement funds in this case.
My company stopped matching my 401(k). I didn’t change much. I was planning to invest in a ROTH IRA anyway, so I’m doing both. The rest of my money will be used to bolster emergency fund.
Honestly it’s fine they took away the 401(k) match. I’d rather have my job than the match. Wouldn’t you?
-Nate
Hi Nate!
Yes, I only really considered the 401K match ‘icing’. If they need to cut it to avoid laying people off, then it’s what I would do too.