401(k) Employer Match Cancellation

If you work at a company that has stopped 401(k) contribution matching by your employer, you should be happy, rather than upset. I’ve been talking to a few people, over email, about how they should respond to their company canceling their 401(k) match. Some are upset that their companies did this (one of them had it coupled with a 5% cut in salaries), but I reminded them that the alternative was the fire some of their co-workers. They understood that logic.

The next question was whether they should continue to contribute to their 401(k) and I said Yes! The recent drop in the stock market might give you reason to consider pulling back a little, the slowing of the economy might give you another reason to pull back a little, and the prospect of losing your job may have you wanting to bolster your emergency fund.

I would say that only the last reason is a valid one if you are considering lowering your 401(k) contribution. Unless you’re taking the money and earmarking it specifically for emergency savings, I think you should continue to make contributions, with or without the match, because in the long run the market will recover and you will retire a much happier person.