My 401k: No More Match. Keep Contributing?

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My 401k: No more match. Keep contributing? OK, so your employer announces the following regarding:

Your 401k: No more match.

Should I keep contributing?

In a word, absolutely.

If you can swing it, you ought to continue to contribute.  I have given this same advice out for my entire career, but more and more over the past several months.

But your employer has stopped making matching contributions.  Now what?

There have not been too many employers who have made "full-blown" matching contributions in recent times.  Many employers downshifted to making a minimal match, like matching the first $2000 that you contribute.  In that sense, it really was free money.

Now that has ended in many cases.

The match often arrived as shares in the company.  The "good news" is that you will no longer be getting those shares of your employer's stock added to your plan.   They usually came with restrictions regarding sales.

You can still contribute up to $16,500 in 2009.  If you are over 50 years old, there are other provisions.  The main thing to remember about making 401k contributions is they reduce your overall taxable income (contributions come out on a pretax basis), and the money compunds without taxes until you withdraw the funds.

Even though there may not have been earnings lately (and many people have significant losses), over a long period of time, not paying taxes on gains can really be significant.

Keep contributing.

Thomas Mullooly  is the owner of Mullooly Asset Management, LLC, NJ Fee Only Investment Advisor, providing guidance for your 401k account. Mullooly Asset is a fee-only alternative to stockbrokers and financial planners.

Tom's popular email alerts help folks to reduce the risks in their portfolios. To learn how to stop making investing mistakes or if you would like a free look at your 401k account at work - or your 403b annuity, or section 457 deferred compensation plan at work, visit www.mullooly.net today!

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