What Steps Should You Take If Your Employer Suspends Your 401k Match?
“Millions of Americans rely on employer-sponsored plans to be the cornerstones of their retirement. But, what happens when circumstances force your employer to change or even eliminate their retirement program?- Brad Rhodes
COVID-19’s effects are being felt in nearly every sector of the global economy. Stay-at-home orders, reduced hours, and supply-chain shortages resulting from the virus have forced many companies to make tough choices to remain afloat. One of these choices is in the area of company-sponsored retirement plans.
According to benefits experts, over 16% of American companies have suspended matching contributions to their qualified plans due to financial hardships caused by the pandemic. Even more troubling, nearly 1.5% of all businesses have chosen to terminate their retirement plans as a cost-saving measure. The “perks” businesses typically give their employees are usually the first things to go when times are lean.
If you find yourself faced with either having no match from your employer or without a qualified plan at all, you may want to take a close look at how this will impact your retirement and consider the steps you need to take. Even as the pandemic measures begin easing a bit, companies and individuals still find themselves in an unpredictable and stressful market. If your employer does suspend matching contributions, there are a few steps you can take to help maintain and grow your nest egg.
Keep your wits about you.
Panic often results in a person making bad decisions with their money. Unfortunately, many of us will not have time to rectify such money mistakes. It would help if you tried to focus on the idea that, for most companies, suspending a retirement plan is simply a temporary measure. Avoid the temptation to drain your qualified plan until you are sure of the situation and have spoken to a financial advisor.
Think about rebalancing your portfolio.
Losing your workplace plan or the matching component is an excellent reason to reach out to your financial planner and ask them to look over your current investment mix. After all, a lot of your original retirement blueprint likely revolves around having a solid company-sponsored plan. Now is the time to review your portfolio and find any areas of improvement.
Ask yourself critical questions.
If your employer is scrambling to find ways to save money, including eliminating benefits, you need to be thinking about the company’s stability. Do you think the company where you work can realistically outlast a recession? Do you anticipate layoffs or other budgetary cuts? Will your position and salary change?
Is your emergency fund enough to see you through upheavals in your employment?
Talk to your advisor about increasing 401(k) contributions.
It might seem antithetical, but depending on how close you are to retirement, you might want to increase your contributions. Contributing more may help you offset the lack of matching funds from your employer. As of 2020, you can contribute up to $19,500. If you are 50 or older, you can also contribute an additional $6,500 to help you catch up.
The last word.
While it is stressful to discover that your employer has cut back on their employment plan, it is not a cause for panic. It is, however, the perfect time for you to reach out to your trusted financial expert for guidance on handling this situation. You will want to take a deeper look at your current portfolio to see if your investment mix still makes sense in this new, ever-evolving economy.