What do you do if your employer doesn’t match contributions in your 401(k) at all? Should you just go with your own retirement plan?
As the saying goes, not so fast! Last week I talked about how many employers match your contributions to a 401(k) plan—often dollar for dollar or 50 cents on the dollar. This is free money. But it’s not the most important part of a 401(k)—it’s the dessert not the main course.
Like I said last time, the two most important things about a 401(k) plan are 1) it is simple and automatic and 2) it is tax-deferred. None of that changes if the plan lacks a match. So in my view, for the vast majority of Americans who have one, the 401(k) is the place to start.
I want to flesh out why the simple and automatic is important. Say you take a new job and they have a 401(k) with no match. If you fill out the paper work, sign up to contribute 6%-8% of your before tax salary, and pick investments, it is set it and forget it. After that you’ll be investing a little bit at a time—usually every two weeks or once per month. The pros call that dollar cost averaging, and it helps you buy more when the market is low and less when the market is high.
On the other hand, if you don’t fill out the 401(k) paper work and think, “Instead I will do this on my own,” you are going to have to set everything up by yourself. For most people, that’s like starting a diet or redoubling their exercise. We want to do it, but often we don’t or we procrastinate.
What if I don’t like my plan? Should I walk away from my 401(k)?
As a general rule, I don’t think people should walk away from a 401(k). These days most 401(k) plans are in really good shape. Years ago costs and quality were sometimes an issue, but there were lawsuits over the years so employers have gotten religion over them and brought their A-game.
But, even if you are in the rare situation that your 401(k) has some mediocre choices, not all of the investments in your 401(k) have to be amazing for you to enjoy good returns. You really only need a few of the investments in your portfolio to be good to have a lot of success. Find the best options, make sure you are diversified, and go with them. Figuring out which investments are worthwhile is easier than you might think. You can spend an hour on Google and go from being skeptical about your to realizing that it’s a great retirement tool.
Does that mean that it would never make sense for someone to pursue a different option?
While I love the 401(k) and really believe that it works for people, there are situations where it would make sense to go in a different direction. When you change jobs, it often makes tons of sense to switch to an IRA. The average American goes through 11 jobs in their lifetime; can you imagine trying to keep track of ELEVEN different plans? When you switch jobs, you can roll old 401(k)s into an IRA—ONE IRA. What you want to do is put your rollover IRA with a fund supermarket such as Fidelity or Schwab. Once the money is there you can select a diversified mix of funds with low fees and strong long-term performance.
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This Week’s Celebrity Instagrams (10/15-10/21)
31 photos Launch gallery
1. Just a NY girl with BIG dreams....
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2. HAPPY CHILDREN=QUALITY PARENTING. We don't always see eye to eye on everything and that's normal. We're human beings. But we come together and do it right for what's important, the kids. We are not enemies, we are parents. And we are parents 1st. S/O to @monyettashaw for making Mason's bday memorable. S/O to @itscrystalsmith at home taking care of our other lil' Prince. ❤️❤️❤️ THIS IS WHAT CO-PARENTING LOOKS LIKE. #Blessed #Happy #AboveTheDrama #BiggerThanUs
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3. So happy to finally be able to share with you all that I’m the new Global Brand Ambassador for @Revlon! Follow my day on RevlonSnaps. Yay! Choose Love, Everybody! #RevlonXCiara #chooselove #ad
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4. Glam on point!!!@makeupbymotoko & @shaylinjoneshair #easybreezy @lifetimetv #beachesmovie #january2017 😘
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5. ✨True love ✨📸: @jessiemarrerophotography
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7. Today was not easy..but by the grace of God we all got through it. Words cannot express our gratitude for all of your Prayers, Positive thoughts and Support for us throughout the years. Tommy will be missed but most certainly never forgotten...And PLEASE don't ask "Where's Martin?.." he was there too...just not in this picture. Lol! God bless you all.. #LoveConquersAll #MartinShow
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9. West coast get ready for #RockyHorror. I will be live tweeting again. #letsdothetimewarpagain
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10. #THEKEYS pre order yours now ... Available everywhere #NOV22 #WeTheBest 🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑🔑
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11. We about to ROCK at #KCABlackBall!! All for our life-changing effort to end 🌎 AIDS.
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12. Today's #SNAPJACK is brought to you by @yazzthegreatest 😂😂😂💋💋💋
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13. Damn girl you kinda old to be headed to the Go Go. You coming in at the age they leaving. LMAO
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14. Daddy daycare B-Boxin with @acewellstucker @shopraisingace
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15. #FBF Naviyd & URV "LIL MONSTERS"
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16. HAPPY BIRTHDAY TO ONE OF THE BIGGEST LEGENDS IN OUR HIPHOP HISTORY! @snoopdogg CONTINUED BLESSING AND LOVE FAMILY!!!!! REAL OG!
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17. Thank you for a beautiful night VSU! Let's do it again! #HOMECOMING
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18. Had a great time this morning with my familia Erica, Griff & Truth!!
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19. Check out my interview on @essence facebook live. #inmyownwords #nycpromo #day2
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20. #She💋 #tbt #TheCoveAtTheAtlantis #DawgPawsAndAll
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21. Bae #retailtherapy
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22. Why me and @coryhardrict got the same pose... and notee... new mouth #naked
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23. When my husband is my personal 'hype-man'! it kills me every time! 💜😂 #WHATNOW #lostfiles📷
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24. Diggy Simmons
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25. Hand full of @jacquieaiche 💙💎💍 @esnail_la 💅🏾
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26. SuperSoulers! You can watch my interview with Carl Lentz live from my Facebook page, tomorrow at 11a ET| 8a PT. #SuperSoulSunday
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27. 💋 .. When the friendship is easy like Sunday morning. ☀️
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28. Sunday mornings are the best........... hugs and cuddles with my angel
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29. #huggar16 #hellohuggars
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30. My gym is everywhere!.. #RnBMoney #TheGeneral 📸: @twelvepastseven
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31. Nothing I would rather be doing... Rocko setting up our movie, Romelō working on a puzzle & Laiyah singing and sharing all she's learning at school... I'm so grateful for the joy they've brought into my life ... Praying for peace , joy & love in the home of EVERY family ♥️ #HeadScarfPJSunday LOL 😂
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