Thought I was smart ignoring my 401k match for 3 years. Big mistake.

I was dead set against putting money into my 401k because I figured I could invest it better on my own. Finally ran the numbers last month and found out I left about $4,500 on the table from employer matches over that time. That's basically free money I threw away because I was stubborn. Now I'm maxing out the match at 4% and putting the rest into a simple index fund. Anyone else make a dumb money move like this and kick yourself later?

3 comments

3 Comments

butler.finley27d ago

Wait, is 4% really enough though? I mean, if you're already being forced to play the 401k game by the company, why not just go all in? Free money is free money, but you're still letting them control how that match gets invested. They probably have you in some target date fund that's loaded with fees and underperforms the market. You might be down that $4,500 now, but you could be down way more later if the whole market takes a dive and your job gets cut, which happens all the time in my line of work. Idk, maybe I'm just paranoid, but I'd rather have that cash liquid so I can actually use it if things go south.

chen.casey27d ago

Fair enough, @butler.finley, you're not wrong about the fees. My last job had us in a target date fund with a 0.6% expense ratio and it bugged me for years. That said, I still took the 4% match because turning down free money felt dumber than paying a little extra in fees over time. You can always roll it over to an IRA later and pick your own stuff.

brian_rivera5927d ago

I read somewhere that a good chunk of target date funds actually carry expense ratios around 0.5% or higher, which doesnt sound like much but it eats into your gains over 30 years. The bigger thing I remember from that article is that most people dont realize the match is literally free money, like even if the fund underperforms by 2% a year, youre still ahead because the match is an instant 100% return on that first portion. I think the liquidity argument makes sense if you know for sure youll need the cash soon, but most of the time people just end up spending it on stuff they forget about.