Saving for retirement is an important thing — but it’s not always an easy one. When you have bills like mortgage and car payments to contend with, among many others, finding money for retirement savings purposes can be a challenge.
That’s why you’ll often hear that it’s a good idea to try to snag your full 401(k) match if that option is available to you. Not everyone has access to a 401(k) plan through work. And even if your employer offers such a plan, there’s no guarantee that you’ll be eligible for a matching incentive.
But let’s your employer does offer a match of some sort. You may be inclined to try to push yourself to claim it in full because hey, that’s free money for your retirement. But while it’s generally a good idea to try to snag your employer match in full, there are a few exceptions.
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When your workplace plan is truly awful
The problem with 401(k)s is that they can be limiting in terms of the investments they offer, and they can be expensive in terms of administrative and investment fees. If your 401(k) doesn’t offer investments you’re comfortable with, and the fees are exorbitant, then you may decide to just save for your senior years on your own in an IRA.
IRAs allow you to invest in a wide range of assets, including individual stocks. So you might not only benefit from lower fees, but also, more substantial growth in your account.
When your employer’s vesting schedule is restrictive
Many employers that offer 401(k) matches impose a vesting schedule that requires employees to stay on board for a certain amount of time before being eligible for their matching dollars. If your employer’s vesting schedule is such that you’re unlikely to benefit from its matching program, then you may just want to save for retirement in an IRA in the first place.
Some employers impose a gradual vesting schedule where it might take, say, five years to vest in full, but for each year you remain employed, you vest at a rate of 20%. But other employers might employ a system where it takes five years to vest, and if you don’t stay a full five years, you get 0% of your match when you leave.
Meanwhile, these days, it’s more common to hop from one job to the next after a shorter stint of employment. The Bureau of Labor Statistics says that between ages 18 and 24, workers change jobs an average of 5.7 times. Between 25 and 34, they change jobs an average of 2.4 times.
If your employer’s vesting schedule requires you to stick around for many years to get your money and that’s not part of your career plan, then you may be better off forgoing that match. It may not be worth it to stick with a lower-paying, unfulfilling job in the hopes of walking away with $6,000 for your 401(k) if instead, you can hop to a better job with more growth potential and a $10,000 salary boost to start off with.
Much of the time, it does pay to try to claim your full 401(k) match. But there are exceptions, so don’t beat yourself up if you end up deciding not to pursue that free money.
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