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Where should I put my $ now that company doesn't match 401k?

Posted by piedmont (My Page) on
Tue, May 26, 09 at 17:26

My company used to match some of my 401k contributions, but they stopped.

Is there a place I can put it into a retirement fund and if heaven forbid a problem happens I can take from it without penalty (unlike a 401k)? Where'd you put your money into, just looking for opinions. Thanks!


Follow-Up Postings:

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RE: Where should I put my $ now that company doesn't match 401k?

Well, you can simply invest in an investment vehicle without a tax benefit and take from it under the general tax rules for investing (which, I suppose, are not completely without penalties).

However, I would recommend you look into the rules and benefits of a Roth IRA.

With a Roth, you put money in post-tax, however, it grows and you never pay taxes on the growth. Some benefits of a Roth vs a 401K or traditional IRA are that you can take out the principal at any time without penalty for any reason. Not that I would recommend this, but it is an option.

Another benefit of the Roth is the withdrawl rules. I don't know them completely, but it is my understanding that there is no minimum withdrawl age and there is no annual minimum withdrawl amount like there is with a traditional IRA.

Additionally, there are also some considerations as I believe at least your spouse can inherit your Roth with minimal tax penlties. I am not sure about willing it to other family members or individuals not related, but possibly. I am sure someone with more knowledge on it will chime in!


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RE: Where should I put my $ now that company doesn't match 401k?

Just because your company is no longer matching your 401K contributions does not mean that this is not a such good retirement plan anymore. You can still put in a lot more in your 401K tax deferred than you can put into a Roth IRA or, I believe, any other tax-deferred arrangement -- The max is over 20 thousand, I think. Go to IRS.gov to find out the rules. The benefits of tax deferral are huge, plus you do not pay income tax on the money you deposit into the 401K. That means your taxable income is lower and, if that puts you into a lower tax bracket, you save a whole lot of money.

So, don't be too hasty in turning away from 401K contributions. If you are concerned that you may need to access money from your 401K before you retire, there are rules that allow you to do that, usually if there is a hardship or to buy a house for first time buyers. The rules are complicated and I do not remember them all. Go to irs.gov and find out.


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RE: Where should I put my $ now that company doesn't match 401k?

I would avoid a loan from my 401K at all costs.

You pay it back with post-tax dollars so you are taxed on it twice and if you ever leave your company, or worse, get laid off, the balance is due in 60 days or so.

I do agree that a 401K is a great investment vehicle for retirement funds. The limit is $16,500 this year if you are under 50 and there is $5K additional you can add as 'catchup funds' if you are over 50.

Some employers now have Roth 401Ks and you get the benefits of contributing to a Roth, but you can contribute as much as $16,500. It's a very nice thing!

Here is a strategy I have read that makes sense to me:

1) Contribute to your company's 401K until you get the full match (free money!).
2) Contribute to a Roth IRA up to the max.
3) If you can still contribute more, go back to the company 401K for the rest of the funds even if they are not matched as you still get a tax benefit.

Sounds like a good strategy to me!


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RE: Where should I put my $ now that company doesn't match 401k?

I have a question regarding the 401k. My plan is to move to Germany within the next year but had a hard time finding anything about 401k private pension plans in Germany. So if anyone could shed some light on this topic for me, I would really appreciate the effort. :)


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RE: Where should I put my $ now that company doesn't match 401k?

I think this is one you might need to to take to your financial advisor. It all depends on how your 401k dollars are invested, how many years until you retire, etc.

The below link is an example of a site that ranks the performance of some 401k plans based on peer 401k performance. If your company ranks high, I'd continue to invest even without the match; however, if your company ranks low, I think I'd turn to a financial advisor for advice on good retirement investments. There are other sites that do the same thing, but this is the one I have used.

Good luck.

Here is a link that might be useful: Link


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Forgot to add

Emergency funds should be kept in a traditional type of account, such as a no penalty CD, or other insured deposit, savings bonds, etc.

I actually have my funds in traditional CDs, which often have much higher rates than no penalty CDs but the maturities are staggered such that I have one maturing every other month and if I had an emergency, I would only be a short time frame away from a fee-free withdrawal.


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RE: Where should I put my $ now that company doesn't match 401k?

In the bank/CD's. At my age all I want to do is make sure my money is safe. My sis lost $50,000. in the market, a friend lost all of her savings and said she should have listened to me another one went to cash in her funds to buy a home and guess what???? she didn't buy the home.


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RE: Where should I put my $ now that company doesn't match 401k?

Roth IRAs are great for emergency accounts. You can take out your contributions at any time and all the interest you earn will be tax-free, unlike non-retirement accounts.(but don't touch the earnings! They're taxable and there's a penalty if you're under 59 1/2). Use them as an adjunct to your 401K.
They're also great for working kids. Money in Roths doesn't have to be reported when they fill out the FAFSA & helps them get financial aid.


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RE: Where should I put my $ now that company doesn't match 401k?

"I would avoid a loan from my 401K at all costs. You pay it back with post-tax dollars so you are taxed on it twice and if you ever leave your company, or worse, get laid off, the balance is due in 60 days or so.

I've seen the "taxed twice" claim about 401K loan many times, usually on the websites of big investment companies who have a stake in keeping your 401K accounts to themselves for as long as possible. It's bogus.

Anyone who takes out a 401K loan will make monthly payments back into the same 401K, usually for a period of five years. Of course the payments are made with after tax dollars, but the same would be true of paying back any loan except for those tied to a mortgage, such as a HELOC. And once it's paid back, the withdrawals you take out when you finally retire will be taxed at the same rate as they would have been if you had never taken out the loan.

You pay interest on the loan at a fixed rate that is set by the plan and usually lower than any rate you could get for an unsecured loan. That means the unpaid loan balance is earning returns at that fixed rate. If you happen to take out the loan at the beginning of a down market, it'll likely be earning at a better rate than the rest of your 401K, and you will actually have a larger 401K balance at the end of the loan than you would have had otherwise. In times of an up market, however, the reverse will be true.

The real and best reason not to do it is if you think you might leave your employment, voluntarily or otherwise, before the end of the loan term, because you will have to pay it all back.


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RE: Where should I put my $ now that company doesn't match 401k?

Usually there are more restrictions of a retirement plan to which an employer contributes and if you don't have to cope with that restriction, you have a wider choice of investment vehicles which are available to you.

I don't know enough about your retirement plans, whether employeer-contributed or not, to offer any useful advice, but I am less than enthusiastic about the official one here in Canada, though most financial advisors say that every employee should have one. If any of you Canadians want to know my reasons - you can send me a personal email.

As for emergency money, though I advised that everyone should have some cash available quickly in case of emergency, sometimes I have it, sometimes not.

If I'm low on available cash, for most emergencies I can use my credit (read "debt") card and I have a line of credit at the bank, rarely used, that I can draw on to pay that credit card loan off in full after the first billng period, then save even strongeer than usual to pay off that loan quickly.

If I want to borrow to invest, I have a different line of credit for that, as the interest is deductible, which it isn't for consumer-style loans, and I don't want to have a possibility of the two issues being mingled.

ole joyful


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