Can you afford to participate in your 401(k) plan?

Research shows that lots of folks participate in their employer’s 401(k) plan because of the match. Many folks also say they participate because they can afford to …but can you afford NOT to participate?

person holding coins saving investing 401(k)

There are a lot of great reasons to participate in your 401(k). This article reports that some folks argue that they don’t have enough money to afford to participate in their 401(k) plan. The article goes on to share five key lessons that can help people reevaluate their ability to invest in a 401(k) plan:

1) How they can participate in their 401(k) without lowering their paychecks significantly; 2) How the match enables them to — in my words — “purchase retirement savings dollars at a discount”; 3) How they can lower their taxes when they contribute to the 401(k); 4) How time leverages the math behind compounding; 5) How they can do all of this for themselves.

I’ve recently heard some folks on YouTube call 401(k) programs the “slow lane” of building wealth. They argue that money might be better investing in building a business. For those of us who aren’t entrepreneurs and appreciate the security of a regular paycheck and corporate life, a 401(k) plan is a best bet when it comes to building wealth. Yes, it takes time – there are no “get rich quick” plans. For entrepreneurs they’re putting in sweat equity and a lot of time and money into their dream.

If you reduce your spending and resist lifestyle inflation, you may be able to do both. Perhaps you invest in a 401(k) program in your day job while you invest in yourself in a side gig or avocational interest that may pay off in time. Don’t put all of your eggs in one basket so to speak.

It’s food for thought. What about you – do you invest in the 401(k) plan at work? Why? Why not?



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