No company match for 2009

The company I work for has suspended there 401K match (which was 2 for 1 and 100% vested straight away) for 2009. I'm fairly young and not totally sure of the ins and outs. Given that there is no match, would I be better of creating a ROTH IRA and put my contribution into that?

Freedomtech,

I am sorry to hear of the loss of your 401k employer matching contributions. But you do still have a job, at least for now.

The general advice is yes, first contribute to your ROTH IRA when there is no matching employer contribution to a 401k.

But do this cautiously. Contributions to the ROTH IRA are After Tax. When your annual contributions exceed the $5,000 annual contribution limit for your ROTH IRA, contribute the excess to the 401k plan. I would suggest each pay period you be contributing some amount to the 401k plan, and some amount to the ROTH IRA.

Thanks for the reply. Yeah, I totally agree about still having a job.

Kudos for voting with your feet (regarding the loss of your match)!

When you (and others) stop contributing to the 401k in 2009, you will actually prevent the owners and officers from participating in the 401k. Now that your plan is a non-safe-harbor plan, the plan is subject to the ADP/ACP test. HCEs (Highly Compensated Employees) can only participate in the company retirement plan based on the level that non-HCEs are participating.

That's a bit of a mouthful, let me restate:
If average contributiions go down, it will actually prevent Owners and Officers from participating in any significant way.
Perhaps they will change their minds about this course of action for 2010.


Regarding Roth v. traditional IRA: What's your marginal income tax rate? If 15% or less, definately go for the Roth!

We all got the new prospectus which had dropped Safe Harbour name. Didn't realise that it was more than just a cosmetic change.

Yeah, with three kids and a mortgage, my marginal rate is very low.