10 Retirement Pitfalls, Pitfall #3: Missing 401k Matches

Yahoo has a list of 10 retirement pitfalls and I'm going to list and comment on them all. Here's today's pitfall:

Not taking advantage of 401(k) matches: If your company provides matching funds for your 401(k) contributions, then not contributing -- or undercontributing -- is the same as throwing away free money. You should be taking full advantage of these matches from Day 1. Even when money is tight in your first years in the workforce, contributing up to the amount matched by your company in your 401(k) plan should be a top priority in your budget.

Ok, look at it this way. I'll give you $1 of my own for every $1 you save. How much would you save? Right -- as much as you possibly could! Why? Because it's a 100% return on your money guaranteed. It's hard to find anything close to that rate of return that's still legal in the U.S. ;-)

Not putting the max in your 401k to get the complete employer match is one of the great crimes against your personal finances and retirement. Don't be guilty of committing it!!!

For more on this topic, see these posts:

• Some People Think a 100% Return on Your Investment Isn't Enough

• The Best All-Around Retirement Account

• Why Contributing to Your 401k is Vital to Your Financial Health

Click here to read part 4 of this series.

Click here to read part 1 of this series.

Comments

[Anitra]

I hear this all the time, but I also hear that you should steer clear of having retirement savings in company stock. My company does a (rather small) 401(k) match, but only in company stock - and they're already a Fortune 500 company, so most index/mutual funds will also contain their stock. Is it still a good idea to contribute the max to get the match?

[markmedic]

Of course it is a good idea if your company is not heading underwater which it should be doing fine if it is a fortune 500 company. Just make sure to rebalance your portfolio at the first opportunity.

[A Tentative Personal Finance Blog]

My wife and I aren't eligible for 401k at our companies yet. We just graduated last May and we haven't reached the one year mark yet at our places of employment. I CAN NOT WAIT until we can get some free money from our companies. Yet... I don't necessarily look at it as free money. It's part of the compensation package people agree to when they sign onto a company. I classify it in the same realm as health, dental, vacation time, etc.

[K]

What do you do if your employer doesn't do any matching at all? Is it then not worth it?