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What to Do if Your Employer Discontinues Your 401(k) Match

Due to the COVID-19 pandemic, some employers have announced in 2020 that they have had to discontinue or reduce their 401(k) matching contributions. According to a recent survey, 23% of employers lowered or suspended their contribution match for employees’ retirement accounts.1

This isn’t the first time companies have discontinued matching contributions. In 2008-09 during the financial crisis, several large companies suspended their 401(k) matches. Many of these cuts were temporary—as the economy recovered, many companies restored all or part of their contributions. 2

In the meantime, this cut could be a considerable setback to employees’ retirement strategies, as fewer dollars will be invested over time. Many times, the contribution is significant. In fact, historically, employers have contributed approximately $4,000 per year on average.3

If your 401(k) match was impacted, don’t let your retirement savings fall behind. Here are a few ways to help make up the difference:

  1. Consider increasing your 401(k) contribution 2-3% if you aren’t contributing the maximum amount. In 2021, employees can contribute up to $19,500, and if you are 50 years or older, you can make catch-up contributions of up to $6,500 per year.
  2. Contribute to a Traditional or Roth IRA. The annual contribution limit for 2021 is $6,000, or $7,000 if you’re age 50 or older. (Subject to income limitations)
  3. Contribute to a Health Savings Account. Those with a high-deductible health plan can contribute up to $3,600; families can contribute up to $7,200 and an additional $1,000 for those 55 years old or older.

Was your 401(k) match discontinued or suspended? One of our experienced Financial Advisors at Jemma Financial can help you understand what this decrease in retirement savings may mean to you and discuss ways you can make up for it.

1 NEPC, LLC based on 105 responses from defined contribution plan sponsors
2 Center for Retirement Research at Boston College
3 Nerdwallet

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