Are 401(k)s Without Matching Contributions Worth It?

by NerdWallet | September 27, 2013 1:00 pm

Since 401(k)s were introduced in 1980, employer matching programs have been an important incentive for workers to fund their retirement accounts. However, no company is required to provide a match, and for financial reasons, many choose not to… 42% of U.S. companies[1] do not offer an employer match.

While 401(k)s are an obvious first choice for any retirement savings if your employer matches contributions, what if they don’t? Are 401(k)s still a good option?

401(k)s vs. IRAs

Even if your employer doesn’t offer a 401(k) match, you still need to save for retirement[2]. If anything, you need to save more. But should you use a 401(k)? An IRA? Both?

When deciding (or prioritizing) between IRAs and 401(k)s, there are a few aspects you’ll definitely want to consider: contribution limits, the diversity of funds available and whether the money is deducted from your paycheck pre- or post-tax. IRAs also have eligibility[3] requirements that may make your choice obvious.

Be Flexible

Because of the rules[4] governing 401(k)s and IRAs, and your changing financial situation, your best approach for retirement saving should change over time. For example: 

Note: If you’re 50 or over and you (or you and your spouse) are still eligible to contribute to an IRA, your annual limit increases – to $6,500 in 2013.

If You Have to Pick

Because each financial situation is so specific, you should consult a financial advisor before choosing between a 401(k) and an IRA, if you must. But in general:

Most importantly, choose whatever option – or combination of options – lets you maximize your retirement savings, and adjust as your salary and circumstances change.

Read More From NerdWallet:



  1. U.S. companies:
  2. retirement:
  3. eligibility:
  4. rules:
  5. 401(k) Rollovers: How to roll over a 401(k) to a No Fee IRA:

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