No 401(k) Employer Match? No Problem!

When I heard my new employer did not have any sort of matching 401(k) program, I have to admit it did kind of bother me a little bit. (their alternative is far superior, it’s a profit sharing program where they contribute a much higher amount than a typical employer match depending on their performance) However, when you sit down and think about it, not having your employer kick in a few percent of your salary isn’t that significant. Let’s say you have the typical 3% employer match and your salary is $50,000 - that amounts to $1,500 of employer match each year or a little more than $100 a month.

In comparing job offers, you should factor in that $1,500 especially since it will be growing, hopefully, until you retirement and could really be “worth” far more than the nominal dollar amount. However, sometimes we think of employer match as a general benefit and not necessarily what it’s “worth” in a dollar amount because if we did, we’d realize that it wasn’t that much money. So, in that respect the match isn’t that big of a deal. If two jobs were offering the same salary but one had a match and one didn’t, you obviously go with the free money (higher total compensation, though that’s not the official Wall Street calculation). What if one was a higher salary without match and one was lower with a match? It’s much harder there.

I’d say that you should consider other factors between those two jobs because those are important than the differences in 401(k). The environment, the people, the possibilities for advancement - those are significantly more important than a piddly match by your employer into a retirement account you likely won’t touch for many many years. Now, if the two jobs are equal in every respect, then I’m afraid you will have to resort to a coin.

That being said, if you have an employer match, use it! Kicking in a small percentage of your salary to get some free money. In the above example, $1500 isn’t a windfall but only a fool leaves free money on the table!