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What to Do if Your 401(k) Match Is Taken Away

By Maurie Backman – May 8, 2020 at 8:56AM

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Losing a 401(k) match is a harsh blow. Here are your options if that happens to you.

The COVID-19 crisis hasn't just hurt small businesses with a handful of employees; it's impacted larger companies, too. If your employer is experiencing its share of financial woes during the pandemic, it may seek to cut corners wherever possible. In some cases, that could mean cutting back on technology upgrades, equipment, and supplies. Or it could mean eliminating your 401(k) match.

Many employers that sponsor retirement plans match employee contributions to some degree, and as a saver, that's a great way to build retirement wealth and snag free money. So, losing that match could result in a harsh financial blow. Here's what to do if it happens to you.

401(k) statement showing employee contribution and employer match


1. Ask questions

Chances are, your 401(k) match isn't being taken away forever. Rather, your employer is probably pausing its match program so it can get through the ongoing crisis without having to resort to more extreme measures, like cutting staff. It doesn't hurt to ask your HR representative or benefits administrator what plans your company has to bring that match back as soon as it can.

2. Ramp up your 401(k) contributions if you can

Right now, a lot of people are struggling financially because of COVID-19, but if your paycheck has held steady, and you're spending less money each month than you usually do because you're not paying to commute, dine at restaurants, or seek entertainment outside the home, then you may be in a strong position to compensate for your missing 401(k) match by increasing your out-of-pocket contributions. Imagine you typically contribute $150 a month to your 401(k), and your employer puts in another $150 for a total of $300. If you're spending $150 less each month right now, you can put that money into your retirement plan to maintain the same contribution that would normally go into it. Plus, if your money goes into a traditional 401(k), as opposed to a Roth, you'll get a tax break on the extra funds you contribute from your own earnings.

3. Look at an IRA

One of the things that makes 401(k)s so appealing is the option to snag free money via an employer match. But if that match is temporarily off the table, you may want to consider saving for retirement in an IRA instead. IRAs often come with lower fees than 401(k)s, all the while offering more investment choices (specifically, IRAs let you load up individual stocks, whereas 401(k) plans generally limit you to funds). You can open an IRA online through most banks or financial institutions. Of course, once your employer starts matching 401(k) contributions, it pays to pivot back to that plan. But if matching dollars are off the table for the remainder of the year, you may want to consider an IRA.

Losing your 401(k) match definitely isn't a good thing, but right now, it may be a necessary perk for your employer to withhold. The good news is that losing that match won't necessarily derail your retirement savings plans, especially if you make an effort to compensate.

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