Rule #1 Finance Blog

With Investor Phil Town

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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