With business tending to be slower for many right now, I have heard of cases where employers stopped matching employee 401(k) contributions. Along with the market’s downturn, this leaves people wondering what to do. What would you do if your employer stopped matching your 401(k) contributions? Here’s my two bits.

Did the employer drop the match temporarily or permanently? If permanently, unless I really liked the investment options in the 401(k) or the contributions lowered my income in a way that had significant tax implications, I would stop contributing. However, I would continue to invest essentially that same portion of my income to mutual funds I like, which I would set up as Roth IRAs to be automatically withdrawn from my checking account each month. That way it would still feel like I never have the option to spend that money.

If the employer dropped the match temporarily, it’s not as clear. If there is a decent chance they will begin matching again within a year, I would keep contributing to the 401(k). The reason being that it’s a little less hassle to keep it going and you don’t risk the possibility of failing to invest the money somewhere else. There may also be tax implications to your paycheck. However, if the employer won’t be matching contributions again for at least a year, or you really dislike your investment options, I would probably stop contributing.

Hopefully that situation doesn’t arise, for both your sake and your employer’s. If it does, just be sure to continue to invest the money somewhere either by contributing to the 401(k) or in other investments, such as mutual funds. In fact if you don’t trust yourself to be sufficiently disciplined to continue to invest that money, I would recommend that you simply stick with the 401(k).

Those are my two bits. What are yours?

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