More Pay or a Higher Retirement Match?

Here’s the dilemma: you’re talking about getting a higher 401(k) match from your company, but should you just take a higher paycheck instead?

First, what is a 401(k) contribution match? In simple terms, you put in a dollar, your company puts in a dollar. Your company matches whatever you put into the account. Sounds great right? In some cases, it is. In others, it could be a waste of your time and money.

Watch my video below where I discuss the pros and cons of more pay vs. a higher retirement match.

In general, if your company does not offer a 401(k) contribution match, keep the money and invest it yourself. The biggest problem with a 401(k) when it is not a match is that it restricts what you can invest money in.

Companies are often afraid of being sued for bad investments. Because of this, they restrict you to certain investment groups they cannot be faulted for. You are not able to invest on your own terms.

On the contrary, if your company 401(k) offers a match of 50-100%, you should put your money into it.

Lastly, if you’re putting your money into an account other than a 401(k), make sure it is tax-protected. If it’s not, they take out big chunks of money for tax payments. Then, when you go to invest, it’s hard to catch up.

Bottom Line: Invest yourself if your company doesn’t match the money you put in. If it does, take advantage of the free money.

Is a 401(k) match important to you when you look for jobs? Let us know in the comments. I’ve created a free digital course on investing that helps answer questions like this one. Click the button below to learn more about it.

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Phil Town is an investment advisor, hedge fund manager, two-time NY Times best-selling author, ex-Grand Canyon river guide and a former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence. You can follow him on google+, facebook, and twitter.

  • Brad Misialek

    Like Larry and Moraima below I have retirement questions!

    I currently have an IRA filled with funds from a PREVIOUS 401k rollover, as well as a current employer-contributing 401k (3% even if I don’t invest). My dilemma is the fact that I don’t qualify for a Roth IRA, but want to get the benefits of tax-free gains. Since i can’t deduct post-tax contributions to an IRA from my taxes and i can’t create a Roth IRA, which of the following makes the most sense?

    1) rollover everything from my current 401k into my traditional IRA and decrease my contributions to $0.00 and ONLY get the 3% salary match from my employer?
    – i’m afraid of losing a larger % from taxes and future cap-gains

    2) let my $ amount build up every couple months and do rollover after rollover after rollover – which keeps everything tax free? (is that even possible)

    Thanks so much! Love the podcasts/books everything and i’ve got my baby boomer parents buying into Rule #1 as well!


  • Larry Dixon

    What if you are already in a company 401k that has a 6% match and you want to get out of it? Is there a way to get out clean or are you going to take it in the shorts in taxes?

  • Moraima Caceres De Centeno

    For a regular person, if his or her company match 1.5 times what you put in that account, by all means put money in your 401(k).
    what I did was picking the option of a non-registered account, my company still match 1,5 x my max contribution of 10% and later I withdraw my savings and my company matching money and do my own trading. It had been sweet!