Comments on: 401k Mistake: Not Accepting Free Money

By: Mike

Mike — Mon, 09 Mar 2009 11:32:04 +0000

Curt, we obviously disagree about where the market will be in 30 years.

But that’s not even what I’m talking about here. I’m talking about people who are already 59 1/2 who can contribute money and withdraw it right away with no penalty. For them, it really is free money (especially if they can just put it in a money market for the couple days that it would be in their 401k).

By: Curt

Curt — Mon, 09 Mar 2009 04:50:14 +0000

No way. You guys have been snowed into believing that you are getting ‘free money’. 401k or any other government plan to trap your money for 30 years in the market will never be a good idea.

But, 401ks are an investors dream because they have been the most effective tool to trick people into investing their money who have to idea what to invest in and therefore needed an investor.

By: Manshu

Manshu — Mon, 09 Mar 2009 04:25:31 +0000

Mike, Dave – That makes so much more sense now. Thanks for enlightening me!

By: Mike

Mike — Sun, 08 Mar 2009 16:24:00 +0000

Hi John. Thanks for stopping by and commenting.

That’s unfortunate that your 401k has such unpalatable investment options.

Depending upon how large the match is though, you might be substantially ahead of other non-employer-subsidized investment options–even after a 5% loss.

That said, I doubt I’d ever call paying off debt or investing in a Roth a mistake. They’re both great things to do with your money.

By: John Moses

John Moses — Sun, 08 Mar 2009 16:18:00 +0000

I work for a large publicly traded company and I do not take advantage of the match. I would love to be able to take the match and just invest in cash, safe bonds, or an index fund. There is only one “Fixed Asset” fund and it is -5% for the year!!! The others are all high risk equity funds and get this: only 1 of the investment options are above the average based on the index fund that they reference to. So until they offer index funds or some other safe investments I will be paying off debt and investing in my Roth IRA in safe 5-star funds.

By: Mike

Mike — Fri, 06 Mar 2009 16:48:22 +0000

Hi NDP. Thanks for commenting.

Yep, I remember that post. I even commented on it regarding my wife’s 401k.

By: No Debt Plan

No Debt Plan — Fri, 06 Mar 2009 16:40:46 +0000

This has always baffled me. It’s free money. I actually wrote about this a while back (search “pitiful 401k” on my blog). It definitely is odd that people won’t take the free money offered to them.

By: Dave

Dave — Fri, 06 Mar 2009 16:00:02 +0000

@Manshu: Thanks for proving my point!

By: Mike

Mike — Fri, 06 Mar 2009 12:26:11 +0000

Dave: I bet you’re right.

Manshu: But there’s nearly always a money market option in a 401k. Contributing money to a money market, receiving a match, and taking it out later that week has almost zero risk of a decline in value.

By: Manshu

Manshu — Fri, 06 Mar 2009 04:48:46 +0000

Well its not really free money looking at the market today. If I spend 10 dollars extra and then the company matches it only to see my portfolio go down by half….doesn’t make sense then.