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Monday, May 27, 2013

Free Money Finance on Retirement Fund (401K and IRA)


Free Money Finance

Posted: 17 May 2013 01:29 AM PDT
Here's an email I recently received from a reader:
My company just announced a series of changes they are making to our benefits, including our 401(k) plan. Currently, they match $0.50 on the dollar up to 3% of your annual salary (so, if you contribute 6%, they kick in 3%), and they do this with every paycheck. They are now changing this from contributing every paycheck to only contributing once in a lump sum at the end of the year. The amount stays the same, but the timing changes, so I feel like I will be losing out on any gains I may make during the year. (In addition, if you leave the company prior to the end of the year, you forfeit the match for the year.)
I had been contributing 8% of my salary to the 401(k), with an automatic 1% yearly increase. I don't currently have a Roth IRA, but had planned to start one this year. My question is whether the matching contribution change makes it more attractive for me to put more money into the Roth and just put enough into the 401(k) to get the full match, or, since I already have a fair amount in the 401(k), should I continue to increase my contributions to that and just put what I can into the Roth?
What's your advice for him?
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