by Tricia
This year will be the first time I will have the opportunity to participate in a 401(k) plan at work. My company does not offer matching funds. If they offered an employer match, the decision would have been easier. The match is esentially free money and I should take advantage of that even if I have a mountain of debt still looming.
But, the match is not there. Should I continue to pay off debt or pay into the 401(k) plan?
Doing a quick search on Google yielded articles that said I should contribute if there is a company match. There was little that I could find that mentioned the benefits of contributing to a 401(k) when there is no employer match present.
So, I’ve decided to pose the question to the personal finance bloggers at the Money Blog Network Forums.
“I will be turning 30 shortly and I have $24,000 in credit card debt which I am hoping to have paid off by May of 2009 with an aggressive debt reduction plan. As for current savings, I have a grand total of $121.00 in a savings account.
I have the option of participating in a 401K plan for the first time in my life and I am not sure whether to forgo the 401K for now and keep paying off debt or to contribute to the 401K. If my company was giving matching funds, I wouldn’t think twice…I’d contribute to the 401K because I would be getting free money. BUT – there are NO matching funds.
Given our situation, and the lack of the “free money” incentive provided by an employer match, I don’t think I should contribute. I think I should stay focused on paying off our debt aggressively and once it is paid off focus on saving.
I know retirement is important to plan for, but to lock that money away doesn’t seem like a good option at the moment. I just wrote an article about survival debt it made me realize how little it would take for us to have to go back to living that way.
Should we be stashing money away for the future when there is such an unstable present due to bad debt?”
So far, I have received some interesting thoughts.
I’d also like to ask you if you have any words of wisdom that you would like to share. I’m all ears 🙂
