Comments on: Should You Contribute to a 401k Without an Employer Match? http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/ Money Management, Small Business, Career Fri, 20 Nov 2009 20:44:55 -0500 http://wordpress.org/?v=2.8.6 hourly 1 By: Grant http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-20422 Grant Mon, 16 Nov 2009 17:43:09 +0000 http://cashmoneylife.com/?p=1541#comment-20422 You are correct Patrick in that for some people, this may the only option they have this close to retirement. But the reality is, mainstream wisdom is telling the public to "stash their 401k as much as possible" is far too broad of a statement and it's leading about 95% of people down the wrong road. Take Suze Orman for instance with her wide range of viewers from every end of the spectrum telling all of them that the IRA, Roth IRA and 401(k) are the best options. However, in an interview (that's out there somewhere but I can't recite the source), she only had 2-5% of her money in the market when it tanked in 08....because it was "too risky". Diversification is great but even if you were 100% in bonds at the market downturn, you still lost a lot of money and for those close to retirement, that risk- if at all possible, should be avoided entirely with their core holdings. Sure, if all of the ducks are lined up in the right order, a 401k or some market exposure is warranted but my point is that 99.9% of people rely on this market to get them to their retirement goals and this should be the last place they place their money, not the first (like most do). Know what I mean? =) You are correct Patrick in that for some people, this may the only option they have this close to retirement. But the reality is, mainstream wisdom is telling the public to “stash their 401k as much as possible” is far too broad of a statement and it’s leading about 95% of people down the wrong road. Take Suze Orman for instance with her wide range of viewers from every end of the spectrum telling all of them that the IRA, Roth IRA and 401(k) are the best options. However, in an interview (that’s out there somewhere but I can’t recite the source), she only had 2-5% of her money in the market when it tanked in 08….because it was “too risky”. Diversification is great but even if you were 100% in bonds at the market downturn, you still lost a lot of money and for those close to retirement, that risk- if at all possible, should be avoided entirely with their core holdings. Sure, if all of the ducks are lined up in the right order, a 401k or some market exposure is warranted but my point is that 99.9% of people rely on this market to get them to their retirement goals and this should be the last place they place their money, not the first (like most do). Know what I mean? =)

]]> By: Patrick http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-20395 Patrick Sat, 14 Nov 2009 15:52:42 +0000 http://cashmoneylife.com/?p=1541#comment-20395 Grant, you bring up a good point about future taxes. And unfortunately, you're probably right - taxes will most likely increase. But a 401k plan can still benefit people today, especially those who are looking for current tax breaks, are near retirement, or those for whom this form of investing is the only tax deferred plan they qualify for. Grant, you bring up a good point about future taxes. And unfortunately, you’re probably right – taxes will most likely increase. But a 401k plan can still benefit people today, especially those who are looking for current tax breaks, are near retirement, or those for whom this form of investing is the only tax deferred plan they qualify for.

]]> By: Grant http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-20384 Grant Fri, 13 Nov 2009 23:16:22 +0000 http://cashmoneylife.com/?p=1541#comment-20384 Why dodge taxes at todays tax bracket if taxes are only going to be higher in the future? The 401(k) is a retirement plan for Uncle Sam, not you. Lets face it, the taxes that you'll pay when you start withdrawing funds will reimburse Uncle Sam in the first 3-5 years of what he should have received and every dime after is his profit. You think taxes are going to be lower in the future with the Nat'l Debt quadrupling in the last 10 years? Former Comptroller of the US, David Walker, said "We'll have to reduce federal spending by 50% or increase taxes by 60% just to stay afloat" (not verbatim, but you get the drift). Shooting for a lower tax bracket in retirement? Good luck. No mortgage deduction if your house is paid for, no dependents because they all moved out and now you are left with yourself and your 401K to live on. Have fun, I see it all the time. A roth is a step in the right direction, but still too many restrictions. Do some research and you'll find the vehicle thats right for your goals, not Obamas. Why dodge taxes at todays tax bracket if taxes are only going to be higher in the future? The 401(k) is a retirement plan for Uncle Sam, not you. Lets face it, the taxes that you’ll pay when you start withdrawing funds will reimburse Uncle Sam in the first 3-5 years of what he should have received and every dime after is his profit. You think taxes are going to be lower in the future with the Nat’l Debt quadrupling in the last 10 years? Former Comptroller of the US, David Walker, said “We’ll have to reduce federal spending by 50% or increase taxes by 60% just to stay afloat” (not verbatim, but you get the drift). Shooting for a lower tax bracket in retirement? Good luck. No mortgage deduction if your house is paid for, no dependents because they all moved out and now you are left with yourself and your 401K to live on. Have fun, I see it all the time. A roth is a step in the right direction, but still too many restrictions. Do some research and you’ll find the vehicle thats right for your goals, not Obamas.

]]> By: Patrick http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-19850 Patrick Mon, 28 Sep 2009 11:23:06 +0000 http://cashmoneylife.com/?p=1541#comment-19850 Drummer, You may consider <a href="http://cashmoneylife.com/2008/02/14/invest-401k-traditional-roth-ira/" rel="nofollow">investing in an Roth IRA instead of a 401(k)</a> if you are eligible and have not already maxed it out. This will help diversify your taxes in retirement and offer tax free growth until you make withdrawals. Here is more information on <a href="http://cashmoneylife.com/2009/09/09/how-to-open-roth-ira-select-custodian/" rel="nofollow">how to start a Roth IRA</a>, and <a href="http://cashmoneylife.com/2009/09/10/where-to-open-a-roth-ira-account/" rel="nofollow">where to open a Roth IRA</a>. You don't necessarily have to invest in a Roth IRA (they are just a good option for many people). You may find that your 401k is a better option for you. The important thing is to keep investing for retirement. Drummer, You may consider investing in an Roth IRA instead of a 401(k) if you are eligible and have not already maxed it out. This will help diversify your taxes in retirement and offer tax free growth until you make withdrawals. Here is more information on how to start a Roth IRA, and where to open a Roth IRA.

You don’t necessarily have to invest in a Roth IRA (they are just a good option for many people). You may find that your 401k is a better option for you. The important thing is to keep investing for retirement.

]]> By: drummer http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-19849 drummer Mon, 28 Sep 2009 08:55:16 +0000 http://cashmoneylife.com/?p=1541#comment-19849 I currently have non company matched 401k, problem is we only work have the year Aug-Jan...should I stop putting money in until the company starts matching again? I currently have non company matched 401k, problem is we only work have the
year Aug-Jan…should I stop putting money in until the company starts matching again?

]]> By: Slinky http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-18197 Slinky Mon, 18 May 2009 17:55:38 +0000 http://cashmoneylife.com/?p=1541#comment-18197 I just had to make this decision. I'm diverting that money over into my Roth IRA. I've just graduated, so it's unlikely I'll ever pay less in taxes than right now. I also get better investment selections. I just had to make this decision. I’m diverting that money over into my Roth IRA. I’ve just graduated, so it’s unlikely I’ll ever pay less in taxes than right now. I also get better investment selections.

]]> By: Patrick http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-18177 Patrick Sun, 17 May 2009 16:41:57 +0000 http://cashmoneylife.com/?p=1541#comment-18177 <strong>MLR: </strong>Excellent job! My 401k plan isn't great - it is currently .5% match up to 3%, for a total of 1.5% match. I max out my IRA as well. I know that in the long run it is a great idea! MLR: Excellent job! My 401k plan isn’t great – it is currently .5% match up to 3%, for a total of 1.5% match. I max out my IRA as well. I know that in the long run it is a great idea!

]]> By: SavingDiva http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-18149 SavingDiva Thu, 14 May 2009 21:16:50 +0000 http://cashmoneylife.com/?p=1541#comment-18149 As a grad student, I could contribute to a 401k (they call it super saver or something), but there will be no matching. If I am able to contribute, I think a Roth IRA would be beneficial because my income is so low and I'm only going to be in graduate school for a few years. As a grad student, I could contribute to a 401k (they call it super saver or something), but there will be no matching. If I am able to contribute, I think a Roth IRA would be beneficial because my income is so low and I’m only going to be in graduate school for a few years.

]]> By: Patrick http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-18122 Patrick Wed, 13 May 2009 14:57:41 +0000 http://cashmoneylife.com/?p=1541#comment-18122 <strong>Kristen: </strong>I would probably do the Roth IRA in your situation as well. I would definitely research life insurance before buying a policy as an investment. Some of them are full of fees and restrictions. Kristen: I would probably do the Roth IRA in your situation as well. I would definitely research life insurance before buying a policy as an investment. Some of them are full of fees and restrictions.

]]> By: Kristen http://cashmoneylife.com/2009/05/12/contribute-401k-no-employer-match/comment-page-1/#comment-18117 Kristen Wed, 13 May 2009 14:00:09 +0000 http://cashmoneylife.com/?p=1541#comment-18117 My employer doesn't match contributions to our 403b (the non-profit version of a 401k). I am investing in a Roth IRA instead. After I pay off the remainder of my credit card debt (hopefully within the next 10 to 12 months) I plan to also start investing in long-term life insurance. My employer doesn’t match contributions to our 403b (the non-profit version of a 401k). I am investing in a Roth IRA instead. After I pay off the remainder of my credit card debt (hopefully within the next 10 to 12 months) I plan to also start investing in long-term life insurance.

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