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No Match 401K

May 24th, 2012 at 03:37 pm

My work started a 401K program a little over a year ago. The only issue is that they do no match or make any contribution. It is just a way for us to do it on our own through them. I do not contribute very much because its just me socking money away. So I'm wondering if I should up my percentage or should I consider other options?

Posted in Personal Finance, Saving Money | 5 Comments »

5 Responses to “No Match 401K”

  1. ceejay74 Says:
    May 24th, 2012 at 03:48 pm 1337874515
    1337874515

    I kind of feel like you should do some tax-free now but taxed upon withdrawal (401(k) or traditional IRA) and some taxed now but tax-free upon withdrawal (Roth IRA) to kind of hedge your bets. You never know what your tax/income situation is going to be when you're at retirement age.

  2. Petunia 100 Says:
    May 24th, 2012 at 05:02 pm 1337878963
    1337878963

    Do you know what kind of fees you are paying in your 401k? If the fees are high, contribute to your own IRA instead. Choose a low-cost provider such as Vanguard, Fidelity, or T. Rowe Price.

  3. baselle Says:
    May 24th, 2012 at 05:59 pm 1337882355
    1337882355

    I think I would look at the total 401K package - are the funds reasonable and what kind of fees are you paying? You can take 401K contributions out of your taxes, so you would either pay less federal tax or get a higher refund. There are some tax calculators out there where you model it.

    ceejay has a good point where the best case scenario is that you have several pools of money for retirement - taxable (emergency fund), tax deferred (401K, traditional IRA), tax free (Roth IRA). As long as you make under a certain amount, you can contribute both to your 401K and to a Roth (I don't think you can both to a trad IRA and a Roth at the same time). And a Roth can be used in part as an emergency fund because you can remove what you yourself contribute at any time, only the dividend/capital gains/interest has to stay in the Roth.

  4. Salvador Antonacci Says:
    May 24th, 2012 at 10:51 pm 1337899906
    1337899906

    Hi,I was on the same situation as you few years ago,it all depend if you can afford to put 5% or 10%,depend on your age,and the kind of Income you have,and don't worry the match after all it is for your future, yes it will be nice if you Employer contribute some.Also keep one thing on mine, with this Economy right now, do not contribute to a hight Risk Areas be careful what to pick.

  5. MonkeyMama Says:
    May 25th, 2012 at 12:07 am 1337904428
    1337904428

    Fees and expensive funds (common in 401k plans), will be a major deciding factor.

    Tax situation also matters. 401ks are a good tax shelter if your income is on the high side. May be worth higher fees in the interim (can roll to an IRA when you switch jobs).

    Cash flow is a third factor. Even if your tax rate is not high, and an IRA makes more sense (less expensive than 401k), a small tax break may mean more to you now with debts to pay, etc. In which case, I'd do a regular IRA instead of a ROTH.

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