Without a doubt, the 401(k) is the most popular retirement plan currently offered. Some plans offer a very rich employer match while others don’t offer a match at all. Keep in mind, employers are not required to provide a match. It just makes a good employee retention tool.
What is the employer match? The match is for employees that contribute toward their retirement. They receive a percentage of additional matching contributions based on the amount of their deferral. Typically employer match averages between 3-6%.
So what if your plan doesn’t have a match?
Why should I contribute to a matchless 401(k)?
A matchless 401(k) still has tax-deferral. Even though your employer is stiffing you on the match, it still makes sense to contribute. All the new contributions as well as the money residing in your plan are growing tax-deferred. Tax-deferral allows your funds to grow faster. Without Uncle Sam there, grabbing a piece of your coconut cream 401(k) pie, all your money continues to grow for the future. Plus, if you have access to the Roth 401(k), your after tax contributions would grow tax free!
A matchless 401(k) is a forced savings vehicle. I’ve talked about this in previous articles. Having money removed from your paycheck before you spend it is a bonus. For many people if they have it, they spend it. Payroll deductions come out just like taxes and health insurance, and somewhat force you to save. I love automated savings.
A matchless 401(k) still requires that you save for your future. I’ve often heard people use the excuse that there’s no match, so they don’t contribute to their company’s 401(k). That’s just baloney! You still have to save for the day that you cannot work anymore. Even a matchless 401(k) allows you plan for your eventual retirement. Use it as a tool. Take advantage of the forced savings and the tax-deferral benefits.
So what is the best reason you should contribute to a matchless 401(k)?
You just can’t afford not to. You can’t afford to ignore saving for your own retirement. No one else will do it. Even with the match, the majority of savings will come from your contributions. You also may not work for the matchless 401(k) employer your whole career. If you switch jobs, you can move this money to the new matching 401(k).
If you liked the article, subscribe here for free! I’ll have my virtual paperboy, deliver it to your email inbox every Friday.