Transcripts

"Money File"-401k Lose Corporate Support

SUSIE GHARIB: In the "Money File" tonight, 401(k)'s and the disappearing corporate match. Here's Eric Schurenberg, editorial director at Bnet Moneywatch.

ERIC SCHURENBERG, EDITORIAL DIRECTOR, BNET MONEYWATCH: It's bad enough that every equity fund in your 401(k) lost money last year or that you can't stand to look at your statements anymore. Well, it might get worse for us 401(k) holders. Some companies have stopped making matching contributions. That's right, the feature that really makes 401(k)'s must- have is now in jeopardy. All right, a little perspective: because a few companies made this decision -- Fedex and Starbucks among them -- doesn't mean yours will. So keep saving and getting that match unless and until your company says no more. After all, you still need to save for retirement and a matched 401(k) remains the best way to do that. But what if your company does pull the plug on matches? The best thing to do: keep contributing anyway. You still get taxes deferred on the money you put in and any returns you get. Plus your contribution comes out of your paycheck automatically, which eliminates the biggest risk to your future apart from the bear market, which is failing to save. But here's one wrinkle. If your company stops matching and you'll make less this year than the $166,000 limit for full contributions, consider putting up to $5,000 of your planned 401(k) savings in a Roth IRA. Once money's in a Roth, it's totally tax free, not just tax deferred. As long as you put the same amount in the Roth as you were going to save in the 401(k), you'll come out ahead, especially if taxes rise in the future. Yes it's better to get free money from your employer. But if you can't, keep saving and think about adding that tax free Roth. I'm Eric Schurenberg.