We paid a sizable tax bill last April. One of the reasons was that I only made partial contribution to my 401(k) account in 2007.
After changing my job middle of the year, I didn’t make any contribution to my retirement account because 1) there was a three-month delay preventing me from contributing immediately; 2) I was a little lazy and was hoping to make another quick job change, that of course didn’t happen. Though I eventually set up an account early this year and started to make regular contributions since then, I missed more than half of the allowed pre-tax money in my 401(k) last year. Did I regret skipping part of the contributions in 2007? Yes, not just because of the tax bill, but also the missed contributions that can never be made up.
Right now 20% of my paycheck goes into 401(k) and at that rate, I will be done by the end of this quarter. And I am doing the savings without a penny match from my employer! Sure, a match will be nice, but I am saving for my own retirement. If I can afford to set aside money now for my future, then I will, regardless of the match, because I know at the time when I retire, my own savings will be the main source of my income.
A few days ago, there was an article on MSN Money titled No 401(k) match? Save anyway, which offered what seems to be so obvious
You don’t need a company match to save for retirement.
After all, we are saving for ourselves, right? If the answer is Yes, then you should be saving in your 401(k) retirement account regardless a match. Is that what you are doing? Cast your vote here.
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I work for state government. We have a defined contribution pension plan, essentially a employer-funded 403(b). I could make a contribution to my 403(b), but I decided against it. Although my taxable and Roth IRA accounts are my primary long-term investments, I do put a small amount into my employer’s 457 plan.
In short, a 457 is like a 403(b), except that contributions are only income tax exempt, not SS tax exempt, but funds can be withdrawn 30 days after leaving my employer instead of waiting until age 65. I belive 403(b) contributions are also Social Security exempt, hence the age 65 requirement.
I like the 457 plan because if I’m unemployed, I can always access my funds w/o penalty and pay regular income tax.
Also remember that part of all this retirement saving is tax diversification. contributing to 401k now reduces your tax burden now.