When I've written about saving for retirement, one of my first and most adamant recommendations has been to take advantage of an employer 401k retirement plan match, if one is offered, for two reasons: because getting a 401k match is like getting a raise, and who doesn't love a raise, and because 401k match contributions could result in a much fatter retirement account when I leave the workplace.
For these reasons, taking advantage of an employer 401k match just makes good financial sense. But what if my employer, after offering this benefit for years, discontinued it? Then what? Here's what I would do.
Find Out Why
The first thing I would do if my employer eliminated the 401k match is to try to find out why. Is it because the company is having financial problems and can no longer afford it? If so, how severe are these difficulties and could they result in layoffs or worse? Also, are they likely to be short lived (perhaps resulting from cyclical or other temporary factors) or do they appear to relate to a more permanent and fundamental change in the company's prospects?
While this sort of information can be difficult to unearth unless the company is public and, therefore, files financial reports with the Securities and Exchange Commission, it is not impossible. I would start by talking to my boss, while also studying any recent financial reports that are available. Also, I would pay close attention to water cooler chatter, since the corporate grapevine can be surprisingly efficient at getting the scoop on what is really going on.
If the termination of a 401k match seems to be due to severe financial difficulties, it might be time to look for another job.
Investigate Job Prospects
Before resigning, I would do three things to ensure that job hopping makes sense.
First, I would check out prospects for job seekers like myself. After all, if I have little chance of quickly finding a comparable position, I may be better off with a paycheck and no 401k match than no paycheck at all.
Second, I would investigate benefits packages at other firms in my industry. Perhaps the decision to discontinue a 401k match is an effort to be more competitive with other companies in the industry that don't offer this benefit. In that case, changing jobs but remaining in the same industry might get me nowhere and changing industries might mean taking a lower-level and, therefore, lower-paying job.
Third, I would evaluate both the financial (as reflected in my total compensation package) and non-financial (seniority, opportunity for advancement, relationships with colleagues, and so on) benefits of staying in my current job. Yes, losing the 401k match is like taking a pay cut, but if the other tangible and intangible benefits of my job are substantial, maybe this shouldn't be a deal breaker.
If I decide to stay in my current job despite the elimination of the 401k match, I would look at options to make up this shortfall, if possible. For example, I would be sure that I am maximizing my personal contributions to my 401k and perhaps look into the possibility of contributing to other retirement plans, such as an IRA.
Walter Updegrave, money.cnn.com/2012/11/16/expert/401k-match.moneymag, Employer stopped its 401k match. What do I do now?
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