Thursday, February 11, 2010

Should You Take the Return of the Matching Contribution Seriously?

Boomers were particularly hard hit in the days following the market meltdown in 2008.  Not only were your retirement plans decimated.  But the chances of recovering those funds in the near-term seemed to be slim to none.  For every brightside; there was a darkside.

You were among the fortunate ones.  You kept your job.  You were also among the unfortunate ones.  You lost money in your retirement just at the time when your company was trying to stop bleeding cash.  They stopped matching your contribution and you, wondering if they knew something you didn't, stopped investing exactly at the time when you should have actually upped your exposure to a nosediving stock market.  No one ever got rich investing at the top.

But you were scared.  You saw your 401(k) balance nosedive and your future evaporate (or at least it seemed it was) right before your very eyes.  Hindsight tells you that you shouldn't have done a thing; simply waited.

And now, the stock market is moving in the right direction - albeit sproradically and in fits and jerks.  And behold, companies are talking about bring back the matching contribution.

When the 401(k) match returns, and it will, you might find it to be a different beast than the one that was canceled in the previous years. The 401(k) match, a perk or incentive to get you to invest in your retirement in the absence of a pension, disappeared as companies cut back on hiring, increased layoffs and looked for numerous ways to cut costs.

They knew - and in many cases still do – that those that have a job were likely to stay put. Even without the incentive that the matching contribution was, jobs weren’t readily available. In other words, folks stayed put because they had to, not because company B down the road was offering better benefits than company A.

Are we being too optimistic about the 401(k) match?

Paul Petillo is the managing editor of

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