Should You Still Save in a 401(k) Without a Company Match?

Due to the current pandemic, many companies have experienced financial hardship and are therefore reducing or eliminating the amount they match for employees’ 401(k) plans. Here are three factors to consider when you decide whether or not to continue saving in a 401(k) even without a company match.

When You Should Stop Contributing

Contributing to your 401(k) is a great idea in most cases, but it is not the silver bullet of money investing.  Believe it or not, according to Upstart, there are times when you should not contribute to your 401(k). These plans can be surprisingly expensive and even require you to put more in than you are getting out. If you are in excessive debt, you should strongly consider getting out of debt before you contribute to your 401(k).  Studies have shown that people in debt are likely to pull out money from their 401(k) plan to cover their debt payments and therefore become trapped in a vicious, useless cycle. Ultimately, you should only contribute to a 401(k) plan if you are in a solid financial position and can afford to do so.  

The Benefits of Saving Anyway

There are some positive perks to saving in a 401(k) even without a company match.  401(k) accounts are protected assets, so nothing can touch that money.  This is good if you are saving the money for school or other life changes. According to Franchise Gator, you can even use the money in your 401(k) to finance a business. Investing your 401(k) money into other pursuits is a good way to give yourself a leg up.  You get tax breaks for 401(k) funds, so make sure that you take advantage of these in order to save money.

Consider Other Accounts

If your company doesn’t offer to match your 401(k) contributions, according to Kiplinger, you should consider investing in an alternate savings plan such as an HSA or IRA. An IRA can be a good fit for you if your company doesn’t match your 401k contributions.  Traditionally, IRA accounts are more diverse and give you more control over your investments. There are little to no administration fees tied to an IRA account, so costs of contributing are low. IRA funds also allow for a tax break down the road when you pull out money in retirement. This is a good option because it keeps money in your pocket. 

In the end, your decisions regarding your 401(k) must be based upon your own circumstances. Considering these pros and cons can help you make the best decision for yourself and your family.

Do you need help making the best financial decisions for yourself or your family? Contact us to schedule a consultation!

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