Well, I suppose it was only a matter of time…
At the end of the month, my employer will no longer be offering a match on our 401k plan.
The hammer fell in the form of a limited release memo that made it seem as if something new and exciting were being offered but, hidden deep within paragraph two, the dire news was delivered.
You’re on your own now.
So I’m at a bit of a crossroads here…
Should I stay the course?
Should I lower my contribution to focus more on paying down the mortgage?
Or should I just elect not to contribute and invest on my own where there are a lot fewer limitations…
I think I’ve made up my mind on staying the course… I’m not going to.
While my 401k has been a real money maker for me in the grand scheme, regardless of what I’ve said in the past, I can honestly say that the employer match was what fueled me the most to stick with it.
Sure, there’s that tax break in there too, sheltered income or whatever, but let’s be honest… that’s like saying the mortgage interest tax break is a big deal.
Yeah, I fell for that hoax. Oh, buy a house and you’ll get so much back on your tax return… Nearly 7 years in now and I’m still waiting to see that nice return…
Unless you’re right on the ege of moving up or down a tax bracket — it doesn’t make that much of a difference.
I’m not anywhere near falling into a different bracket.
Perhaps lowering my contribution, therefore increasing my bi-weekly paycheck, would be the wisest option?
That way I’d have more coming in to manage my own way — whether it be to pay down the mortgage even faster, save up for that much needed home improvement project, or finally get around to setting up and funding a Roth IRA. Maybe a combination of all three?
Or is that spreading myself too thin? Little sums all over the place never seem to add up for me. Hmmmm…
Maybe I should go all in and say “to hell with it all” and stop contributing entirely?
Based on the success of my weekly transfers, I’m confident in my ability to continue to invest on a regular basis and this way, if needed, I’d have access to the money in the instance that I needed it. That’s not an option under the current strategy.
Another strike against the 401k plan that I have is that my investment options are very limited. I’m pretty certain that I could do better picking out mutual funds on my own rather than being stuck picking from a handful of investment options that I’ve never even heard of. That’s not a knock against my employer — it’s just another gripe I have towards for John Hancock.
The other upside is that my paycheck would go up considerably and my cash inflow would be far in excess of anything I’ve ever experienced. Kinda like giving myself a 15% raise!
Sure, there’d be that tax issue that I mentioned, but let’s be real — I’m not raking in millions so the realized number would be insignificant over the span of an entire year.
That, and now that I’ve got a sizeable amount in savings, if my regular paycheck deductions don’t cover the difference on their own, I’m sure that I could swing it.
Besides, I just had a kid last month. Doesn’t that line me up for a sweet tax break or something? (Based on the mortgage interest lie, I’m not holding my breath on this either…)
In the end, the last two options are obviously the most attractive to me right now.
Based on a gut feeling, right this minute, I’m thinking that I’ll lower my 401k contribution to around 5% just to keep my foot in the door and pocket the rest to do with what I please. (Yep, accelerate the mortgage!)
Later tonight, I’ll play with that nifty paycheck calculator to see how things might fall…you know, a gut check of sorts…