Back in August, I wrote about a new threat to our retirements -- a reduction in company matching money for our 401(k)s. Now it seems that trend is gaining strength. As The New York Times recently reported, "Companies eager to conserve cash are trimming their contributions to their workers' 401(k) retirement plans, putting a new strain on America's tattered safety net at the very moment when many workers are watching their accounts plummet along with the stock market."
Most of us used to look forward to traditional pensions to live off in retirement. But in recent years, those benefits are increasingly being replaced by 401(k) plans, which can reduce companies' expenses and risks. With a 401(k), companies can simply choose to contribute certain sums to employee accounts, leaving the investment performance risk to the employees.
Given this, it has become critical for most of us to participate in our 401(k) plans. Not everyone does, and in order to help workers, many companies are starting to enroll new workers in the plans automatically upon hire, unless they opt out. That's a good start.
The matching funds that many companies have chipped into 401(k) accounts have been similarly welcome -- after all, who doesn't like free money? But those funds now seem to be drying up.
FedEx (NYSE: FDX ) has suspended its matching funds for the year, and it hasn't ruled out continuing those cuts in subsequent years. Other firms cutting off employees' 401(k) funding include:
- Eastman Kodak (NYSE: EK )
- General Motors (NYSE: GM )
- Ford (NYSE: F )
- Vail Resorts (NYSE: MTN )
- Motorola (NYSE: MOT )
Last but not least, Starbucks (Nasdaq: SBUX ) is reportedly making its matches discretionary beginning in 2009.
In these scary times, be sure to make the most of your 401(k). And if you'd like to set yourself up for an painless retirement, and get great recommendations for promising stocks and mutual funds to put more gold in your golden years, try our Rule Your Retirement newsletter service free for 30 days.
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