PHONE: (717) 303-1999

Financial and Retirement Planning Blog

Your 401k Match is Suspended. Now What?

The recent global pandemic has caused many different types of economic fallout. It has resulted in many companies suspending the matching of their employee’s 401(k) contributions. The Plan Sponsor Council of America conducted a survey. It discovered over 20 percent of large companies and organizations are currently suspending their matching contributions. A report from the Center for Retirement Research showed approximately 50 companies have suspended 401(k) matches for its employees.


Many employees are listening to what financial experts are saying about continuing to contribute to their 401(K) if their employer has suspended matching contributions. These experts explain there are certain factors that should be taken into consideration before deciding to discontinue contributions.

*Other considerations for their 401(k) savings
*The pros of continuing contributions to their 401(k) plan
*Benefits associated with no longer contributing to their 401(k) program

Continuing Employee 401(K) Contributions

Financial experts tell workers it is an added incentive for an employer to match their retirement savings contributions. They advise that even if there is no employer matching funding, a 401(k) plan remains a cost-effective method of saving for their retirement. Employees have already done all the important budgeting decisions to regularly contribute to their 401(k) plan. There is no reason to stop since an employee will continue to get immediate tax savings.

Reasons to Stop 401(k) contributions

A 401(k) is an excellent way to save for the long term. It is also important a person does what is necessary to not neglect their short-term needs. If someone does not have an emergency fund to cover their expenses from three to six months, they may need to redirect some of their 401(k) savings to create such a financial cushion. Should someone not have any emergency savings, they are in a position where they may have to take out a loan or make an early withdrawal from their 401(k) plan. The majority of plans enable participants to take a loan, but it must be paid back. If someone is significantly financially impacted by the recent pandemic, they may need to consider how much they need to use to pay their regular expenses. This may be a situation where a worker suspending their 401(k) contribution could be their best option.

Other Considerations

If a person’s finances have not been impacted by the pandemic, but the suspension appears to be permanent, it’s time for them to review their investment strategy. Knowing the fees associated with their 401(k) plan is important. Some of the older plans may have high fees. An employee could improve their retirement savings plan by finding a better investment vehicle elsewhere. This could involve investing in an individual retirement account (IRA). A Roth IRA is not a plan that is tax-sheltered. It does permit a person’s earnings to grow tax-free. This is one of many other options available for retirement savings.

Young People

It is important younger people continue adding to their 401(k) plan even if their employers don’t match their contribution. It is a good way for their money to grow with compounded interest for many years. In many situations, the suspension is going to be temporary. It is an important benefit that provides a company with a competitive advantage when it comes to employee recruitment and retention. In 2008, it is estimated that over 17 percent of companies suspended matching 401(k) contributions. In a few years, the majority of companies reinstated their matching contributions.

Matching 401(k) contributions always have been a perk a company offers its employees. It is common for employees to only contribute enough of their paycheck to their individual 401(k) plan so they can get the matching amount. It is often a 50 percent match on 6 percent of an employee’s salary. Individuals close to retirement age may want to consider seeing if their company reinstates their 401(k) contributions. A younger person may want to consider looking at other retirement investment options.

Investment Advisory Services offered through Retirement Wealth Advisors (RWA), a Registered Investment Advisor. Pennsylvania Wealth Management and RWA are not affiliated. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

This information is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Pennsylvania Wealth Management and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.

Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by Retirement Wealth Advisors.

Million Dollar Round Table (“MDRT”) is a membership organization. Qualifying criteria for membership includes attaining specified levels of commissions earned, premiums paid or income earned on the sale of insurance and other financial products. MDRT membership requirements include the payment of annual dues, compliance with ethical standards, and maintaining good standing with an MDRT-approved professional association. The MDRT logo and/or trademarks are property of their respective owners and no endorsement of Jason Bergey or Pennsylvania Wealth Management is stated or implied. MDRT and Retirement Wealth Advisors, Inc. (RWA) are not affiliated.