Living cheap among other things means learning where and when to save your money.
One of the areas that has generally been a sacred cow of savings is your 401K.
The consensus has always been, no matter what keep contributing to your 401K.
It is time to reconsider that advice.
If you are weathering the current financial storm relatively OK meaning you have your expenses under control, you are meeting your obligations, paying your bills on time and your level of stress in these difficult times is manageable then by all means you should continue to contribute to your 401K.
Whenever it is manageable you should continue to put money away for your retirement and continue to take advantage of your employers matching contributions.
That is found money.
On the other hand there are circumstances that should make you reconsider your current contributions and analyze whether it makes sense to continue contributing at your current level or not.
Your own particular circumstances will dictate the answer.
If you are having difficulty paying your bills you need to rethink your contribution.
If you are late paying bills or if you have built up significant credit card balances then you need to rethink your contribution.
If your stress level is beyond normal because of your financial situation then you absolutely must reconsider your 401K contribution.
The first thing you need to look at is your budget.
What budget you say? Identify your major expenses.
List them and see if there are areas that you can reduce.
If you can find enough expenses to reduce then you may not need to reduce your 401K contributions.
If you can't reduce your expenses then your 401K may be your only answer.
First look at your contribution itself and look at your employers matching contribution.
If your employer will match your first 3 percent, for example, and you are contributing 10 percent, your first step might be only to reduce it and still keep your match.
In this instance if you reduce your contribution to 3 percent from 10 percent you can still continue getting the 3 percent match from your employer.
If you can continue to take advantage of your employers match you should because it is free money.
In that instance you would be reducing your contribution by 7 percent but you would still be getting a combined contribution of 6 percent put into your 401K.
You would have the 7 percent available to pay your expenses and to start a savings fund for emergencies.
Each 401K is different and you will have to review your own plan rules on your employers contribution match to determine what you can do to keep as much of the match as possible.
There should be someone designated by your employer that you can go to get questions about the plan answered.
If you are in extreme dire circumstances financially you may need to consider stopping contributions altogether.
I would advise you look to all other alternatives first, but if you find yourself with your back to the wall and you have no where else to turn then you might need to stop contributions altogether.
The one thing about retirement funds is this: If you can't get to retirement then they are of no use to you.
If you need funds to live then use what ever resources you need to.
Survival takes precedent over retirement.
One of the areas that has generally been a sacred cow of savings is your 401K.
The consensus has always been, no matter what keep contributing to your 401K.
It is time to reconsider that advice.
If you are weathering the current financial storm relatively OK meaning you have your expenses under control, you are meeting your obligations, paying your bills on time and your level of stress in these difficult times is manageable then by all means you should continue to contribute to your 401K.
Whenever it is manageable you should continue to put money away for your retirement and continue to take advantage of your employers matching contributions.
That is found money.
On the other hand there are circumstances that should make you reconsider your current contributions and analyze whether it makes sense to continue contributing at your current level or not.
Your own particular circumstances will dictate the answer.
If you are having difficulty paying your bills you need to rethink your contribution.
If you are late paying bills or if you have built up significant credit card balances then you need to rethink your contribution.
If your stress level is beyond normal because of your financial situation then you absolutely must reconsider your 401K contribution.
The first thing you need to look at is your budget.
What budget you say? Identify your major expenses.
List them and see if there are areas that you can reduce.
If you can find enough expenses to reduce then you may not need to reduce your 401K contributions.
If you can't reduce your expenses then your 401K may be your only answer.
First look at your contribution itself and look at your employers matching contribution.
If your employer will match your first 3 percent, for example, and you are contributing 10 percent, your first step might be only to reduce it and still keep your match.
In this instance if you reduce your contribution to 3 percent from 10 percent you can still continue getting the 3 percent match from your employer.
If you can continue to take advantage of your employers match you should because it is free money.
In that instance you would be reducing your contribution by 7 percent but you would still be getting a combined contribution of 6 percent put into your 401K.
You would have the 7 percent available to pay your expenses and to start a savings fund for emergencies.
Each 401K is different and you will have to review your own plan rules on your employers contribution match to determine what you can do to keep as much of the match as possible.
There should be someone designated by your employer that you can go to get questions about the plan answered.
If you are in extreme dire circumstances financially you may need to consider stopping contributions altogether.
I would advise you look to all other alternatives first, but if you find yourself with your back to the wall and you have no where else to turn then you might need to stop contributions altogether.
The one thing about retirement funds is this: If you can't get to retirement then they are of no use to you.
If you need funds to live then use what ever resources you need to.
Survival takes precedent over retirement.
SHARE
