Some people ask the question if they would be better off investing in their own IRA rather than investing in their companies 401K plan? If your company doesn’t have a matching 401K plan then maybe that is for you. But what I see is that a lot of people lack discipline. What is nice about a company 401K is that it is coming out of their paychecks without any effort from them. They can just get used to seeing what their net check amount is to live on.
Others may not like what options they have available to put their money in their companies 401K plans. In the past some of the companies I worked with had limited options and some pushed company stock. Today it seems like companies are offering more options to pick from within the 401K plans.
As always, I am not giving you any Financial Advice and you should seek advice from your Professional Advisors to see what is best for your situation. See my Disclaimer at MillsWay.com. This is for entertainment only.
With our boys we taught them to always invest in their companies matching 401k to at least the minimum to qualify for a 100% match. Here are some reasons we like them to do it;
- Money grows tax deferred or tax free depending on if they set up a traditional 401k or a Roth 401k. As you know we are a fan of Roth 401ks in our family.
- The matching money is like a bonus or free money. The company is paying you to invest for your retirement. We ask our boys why would they give up free money.
- Those matching funds may not seem like a lot of money at first but it can add up and really help your retirement funds increase. I like when the statements of one of the companies I worked for showed how much money the company matched and how much that money grew to. It is amazing to see.
- Good 401k plans can have lower fees and some the employers doesn’t pass along all the administrative costs along to the employees. I know there is so many fees and fine print. Bottom line it still is a good option for a lot of people to save for retirement.
Reason Not to Invest
There can be some reasons why not to invest in your companies 401k plan. Again, you should seek advice from your professional advisors before doing any investing. Unless you feel you are able to make good financial decision. Here is one reason to think about why not to invest in their 401K match;
- If you think you are going to only work for the company for a short period of time and be gone before your matching money is vested. Some companies it could take three to nine years to be fully vested.
We still want our boys to Invest in their plans even if they think they may not be there for long enough to be vested. I worked for a company that I thought I would only be a short period of time and before I knew it, I was receiving my ten-year pin. Time flies for sure.
Does your company offer a Match for anything you invest into your 401K plan? If so, what percentage do they match up to? If you do have such plan and don’t invest in it please let me know why you currently don’t invest in your 401K matching plan?
Part of me wished I would have worked for one company like my Dad did and have a Pension for life. But Pensions are hard to find in today’s world. Very few companies offer them. Plus people change careers and companies more often in today’s world since we are so mobile and connected.
We hope our boys will not only invest what they need to be able to qualify for the match on their 401K plan but we hope they will contribute up the maximum limit they can invest in the plan. We will talk about that on another podcast.
Here are some positive quotes I like;
“1. Make Money. 2. Use the Money to Make More Money. 3. Repeat the Process.” By Warren Buffett
“There is no way to happiness; happiness is the Path.” By Buddha
“Change Your Thoughts – Change Your Life” by Wayne W. Dyer
Let me know your thoughts about this blog and let me know of others you would like me to do in the future. I feel we can all learn from each other. That is why I am in the helping people retire early, enjoy life more and be more successful. Also, please see my Disclaimer page.
Don’t give up on your dreams; don’t let others talk you out of your dreams. Make your dreams happen. Make it happen today.
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