Should I stop my 401K if my company has stopped matching contributi
My company stopped matching contributions to the 401K earlier this year. Should I stop contributing to the 401K and consider moving my money to a Roth or some other type investment account? I have heard other financial planners say if you company is not matching contributions you should consider other ways to invest you money??
Just because you're no longer receiving a match from your employer, that doesn't necessarily mean you should scrap using your employer-provided retirement plan. In fact, there could still be some good reasons to stick with your plan rather than starting something new.
Before I get into those reasons though, I need to point out a potentially incorrect assumption in the details of your question. You asked if you should consider moving your 401(k) money to some other type of account. Truth be told, it's highly unlikely that you'll be able to do that unless your plan was flat-out closed or you stopped working there. If neither of those is true, the only way you could move your money to something else is if your plan allows in-service withdrawals. And while it's possible your plan allows this specific type of withdrawal, it's not very common. You'd have to check with you plan provider to see if your plan does.
POTENTIAL POSITIVES OF EMPLOYER-PROVIDED PLANS
Now let's shift gears and look at a handful of reasons why you might want to keep using your current plan even though there's no longer a match.
1. It's easy to save - contributing to a company-provided retirement plan is about as easy as retirement savings gets. Once you sign up and select your investment allocation, saving becomes a pretty automatic process. Your savings happens before you ever get the chance to use the money for anything else. Doing it on your own isn't always so clean and easy.
2. It's easy to manage - If you decide to direct your future contributions to another plan, you'll then have to manage money in two different places. While that's not an impossible task, it often does present some challenges in terms of making sure you keep an appropriate allocation and risk profile for your situation.
3. It's potentially less expensive - A lot of company retirement plans (though not all) offer participants the opportunity to invest in funds that have significantly lower expense ratios than those you'll find in the retail market. Even small differences in fees can make a big difference in your portfolio size over the long term.
4. It has higher savings limits - In 2013, you can contribute up to $17,500 into an employer provided if you're under age 50. IRAs cap out at $5,500 (or 100% of your taxable compensation, whichever is LESS).
5. It's familiar - Finally another potential benefit of sticking with your current plan is that hopefully your familiarity with it will help you keep your retirement savings rolling. One danger in starting something new is that if it doesn't initially go well, people will often stop doing it and end up saving nothing. Sometimes there is value to inertia.
GOING IT ALONE CAN WORK TOO
In the end, some of the biggest keys to winning the retirement savings game are to start early, save consistently, save a lot, and keep expenses down. While employer-provided retirement plans often do a nice job or checking all of these boxes, it is possible to accomplish these goals outside of employer-provided plans as well. It just takes a bit more discipline and commitment because you have to do more of the heavy lifting yourself and you might have to give up some of the potential tax benefits of employer-provided plans. If you're good with all of that, IRAs combined with other accounts can work too. You'll just probably want to get some additional specific guidance and help on how best to proceed for your situation.
Thanks so much for your question. I hope this helps and I wish you all the best!