Comments on: Should You Contribute to a 401k Without an Employer Match?

By: SanDee

SanDee — Tue, 18 May 2010 21:11:22 +0000

I find myself interested in investing for my future but had problems beginning it in the past because of never understanding the best options for me. This is one of the situations I have found myself in where I am given the information and told to CHOOSE but am afraid of making the wrong decision so I make NONE. My mother didn’t make it to retirement age and I find myself wondering “WHAT’S THE POINT?”!

By: Daddy Paul

Daddy Paul — Fri, 15 Jan 2010 00:58:19 +0000

“Just because you no longer receive free money doesn’t mean you should use that as an excuse to stop investing.”
Great point. Too many people will say I will put the money in an IRA. Six months later no money has been put in the IRA.

By: Liz

Liz — Tue, 29 Dec 2009 15:13:33 +0000

Grant, I completely agreed!

I think saving for retirement is a great idea and everyone should get into the habit of it. However, what most don’t understand is they’re still playing in the stock market. The key word is “playing” and worse yet, most give money to others to play for them without understanding the rules of the game.

When people talk about 401k, roth ira, and ira it is always associated with “savings” for retirement. The words savings usually means saving accounts, interest earnings, CDs, Money Market Account. Things that doesn’t decline numerically (but could decline because of inflation). 401k, roth ira, and ira are not savings accounts, they are simply investment account that you could diversify towards savings (bonds, cash), or gambling for a chance to win big (stocks). Funds are put together by fund manager with a combination of both the savings and gambling components (stocks). I like to call them dealers, meaning either way they’ll win. However unlike a game of poker where you’ll know the max number of cards and max number of players, so it is possible to calculate the probability of winning. The stock market allows for too many moving variables that make predictions unpredictable. Blindly purchasing stocks by yourself or from money managers is like investing in a business that you have no idea who runs it and what it does. If you’re ok with that then you should consider investing in my unknown business, atleast I won’t charge you commission or fee, and I could guarantee that you’ll make money when the business is actually doing well and not what the speculator think. And your chance of losing it all is only if the business fails and again not what the speculators think.

By: Grant

Grant — Mon, 16 Nov 2009 17:43:09 +0000

You are correct Ryan 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: Ryan

Ryan — Sat, 14 Nov 2009 15:52:42 +0000

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

Grant — Fri, 13 Nov 2009 23:16:22 +0000

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: Ryan

Ryan — Mon, 28 Sep 2009 11:23:06 +0000

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

drummer — Mon, 28 Sep 2009 08:55:16 +0000

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?