Companies Beginning to Halt Matching Contributions to 401(k) Plans
Last week, FedEx announced a series of moves to cut costs as it deals with reduced revenues.
The moves include pay cuts for more than 35,000 employees and a pause in making contributions to retirement plans. Several other firms have also announced that they are no longer matching contributions to 401(k) accounts.
If your company ceases to make 401(k) matching contributions, should you continue to contribute? The answer is absolutely yes. The tax-deferral benefits make 401(k)'s and other retirement savings vehicles an excellent deal, regardless of how much or how little your company matches. Furthermore, since more of your retirement is now in your own hands with the gradual decline of the defined benefit pension plan, you simply cannot afford to stop contributing to your retirement. Plus, with the market down significantly of late, times such as these may be an excellent buying opportunity.
If you're deeply in debt or have yet to establish an emergency fund, it may make sense to temporarily stop contributions to accelerate your debt reduction. However, you must be aggressive in paying off your debts, as you need to save for retirement in the long run.
The good news in the story of FedEx is that they are making the compensation changes instead of announcing a large number of layoffs. It will be interesting to see if other firms follow suit and cut pay instead of jobs.
The moves include pay cuts for more than 35,000 employees and a pause in making contributions to retirement plans. Several other firms have also announced that they are no longer matching contributions to 401(k) accounts.
If your company ceases to make 401(k) matching contributions, should you continue to contribute? The answer is absolutely yes. The tax-deferral benefits make 401(k)'s and other retirement savings vehicles an excellent deal, regardless of how much or how little your company matches. Furthermore, since more of your retirement is now in your own hands with the gradual decline of the defined benefit pension plan, you simply cannot afford to stop contributing to your retirement. Plus, with the market down significantly of late, times such as these may be an excellent buying opportunity.
If you're deeply in debt or have yet to establish an emergency fund, it may make sense to temporarily stop contributions to accelerate your debt reduction. However, you must be aggressive in paying off your debts, as you need to save for retirement in the long run.
The good news in the story of FedEx is that they are making the compensation changes instead of announcing a large number of layoffs. It will be interesting to see if other firms follow suit and cut pay instead of jobs.
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