Snatch Those Matches

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If your employer matches a certain percentage of your contributions to your 401(k) plan, should you contribute enough to get the maximum amount that the company will match? In most cases, it's definitely smart to take advantage of as much company matching as possible. Let's say that for every $1 you sock away in your 401(k), your employer chips in $0.50. That's an immediate 50% return. It would be extremely difficult to beat that with any other investment method.

The only time it might not be so great is if the matching money is going into something you're not comfortable with. If it's going into stock in the company, and you're very uncomfortable about the company's future, then perhaps you're getting a 50% return that will soon become a 0% return. That's an extreme example, though. And, even in that case, the money that you socked away can be in a safer place (perhaps an index fund) and growing.

Finally, think back to companies such as Enron, Kmart (Nasdaq: KMRT), Global Crossing (Nasdaq: GLBCE), and think even of firms such as EastmanKodak (NYSE: EK) and US Airways (Nasdaq: UAIR) and remember that you don't want to have too much of your retirement money tied up in the stock of just one (or very few) companies, even if you have great faith in them. Enron employees had great faith in their employer for a long time, too.

Learn more about retirement issues in our retirement area. We've got 401(k), IRA and annuity information available as well.