{"id":217,"date":"2013-09-25T09:10:00","date_gmt":"2013-09-25T09:10:00","guid":{"rendered":"http:\/\/wordpress-497108-1835547.cloudwaysapps.com\/?p=217"},"modified":"2020-04-03T22:56:49","modified_gmt":"2020-04-03T22:56:49","slug":"8-reasons-not-to-contribute-to-your-401k","status":"publish","type":"post","link":"https:\/\/moneymuser.com\/8-reasons-not-to-contribute-to-your-401k\/","title":{"rendered":"8 Reasons Not to Contribute to Your 401(k)"},"content":{"rendered":"

Saving for retirement is super important provided you don’t want to be 78 and eating Alpo. While you have been paying into social security your whole life and you might even hold a unicorn pension, it’s important to save enough on your own in case these don’t come through for you. An employer sponsored plan, or a 401(k) may be a great option, but it isn’t always the best choice. Let’s examine when you may not want to contribute to your 401(k).<\/p>\n

1. Your employer doesn’t offer a match.<\/h3>\n

One on the major draws of a 401(k), along with automatic payroll withdrawals, is the match that your employer offers up to a certain percentage. For example, your company’s policy may say that your contributions up to 3% of your income will be matched by the company. This is an awesome incentive!<\/p>\n

However, if your company does not offer such a match, there is little reason to contribute. As we will discuss later, other options may be preferable because they offer better investment options, lower fees, and Roth options.<\/p>\n

2. You are in a large amount of high interest debt.<\/h3>\n

Compound interest can be a blessing or a curse, depending on which side you’re on. Investing for retirement can help your money grow rapidly, but it is often a smaller return than you would get from paying off high interest debt.<\/p>\n

Related: 9 Things You Need to Know About 401(k)s<\/a><\/strong><\/p>\n

For example, if you have a credit card with 18.99% interest, you will be hard pressed to find investments that do quite so well. It is generally a good idea to knock out all high interest debt before moving on to investing.<\/p>\n

\"emergencyfund\"3. You don’t have an emergency fund.<\/h3>\n

Retirement accounts are great…when you are in your sixties. For now, you need liquidity in the event of a rainy day. Spoiler alert: there WILL be a rainy day. Having an emergency fund should be your number one priority.<\/p>\n

If your car broke down tomorrow, would you be able to pay for repairs without going into debt? Build an adequate emergency fund for unforeseen costs before contributing to your retirement fund. A good rule of thumb is saving enough to cover all non-medical deductibles and plane tickets home if you live far away from family. After this savings account is funded, you can start saving for retirement.<\/p>\n

4. You don’t like your employer’s investment options.<\/h3>\n

Most companies have a committee that evaluate and choose a limited amount of funds for the employees to invest in. While hopefully this committee is competent, you may not be satisfied by the type of funds or their long term performance.<\/p>\n

With an IRA, you are free to choose whichever investments you would like in your portfolio. It puts you in complete control of your retirement savings and allows you to branch out if you don’t like the 10 or 15 funds your employer plan is allowing.<\/p>\n

Related: 8 Unusual Investments That You Didn?t Know About<\/a><\/strong><\/p>\n

5. Your employer’s 401(k) does not have a Roth option.<\/h3>\n

While many employers are adding a Roth option, others only offer a traditional. What does this mean?<\/p>\n