Can Someone Have A 401K If Their Employer Doesn't Participate?

Can someone have a 401k if their employer doesn't participate? Investment analyst and tax advisor Paul Dlouhy points out that if your employer offers a 401k but doesn't match your contributions, it is still a good deal, and you should take advantage of it if you can.

It is perhaps one of several misunderstandings about the 401k plan that you cannot or should not have one if your employer doesn't participate. Well, you can still have a 401k if your employer doesn't participate; the obvious disadvantage is that you will not get the benefit of the employee contribution match, and may have to contribute more from your paycheck to compensate. Investment analyst and tax advisor Paul Dlouhy points out that if your employer offers a 401k but doesn't match your contributions, it is still a good deal, and you should take advantage of it if you can. "The tax savings are still going to be a major benefit even if your employer won't match" says Dlouhy.


If your employer doesn't match your contributions, you are still saving money towards the all important goal of retirement - just not as much. Some employees don't bother to take out a 401k if their employer doesn't participate, or don't quite know how to go about setting it up. And it may not be quite as easy to have access to your money or accounts if your employer doesn't participate. Says Dlouhy "Saving $20,000 a year pre-tax towards your retirement if you have that opportunity - what do you think?" So even though the end result may not be as good, and it is tempting not to participate - if your employer offers a plan, you should take advantage of it.




If your employer doesn't participate - and recent figures show that around 30% of companies don't - they may have to offer other benefits to compensate, such as salary increases, comprehensive health benefits or stock options, especially in a competitive job market. Generally speaking, larger companies or businesses with more employees are more likely to participate and match contributions. As analyst Paul Dlouhy also points out "Your company may match and you just aren't getting the benefits of that match; around 20% of 401k participants don't contribute enough to get the maximum company match."

It is especially important to contribute as much as you can comfortably afford to, if your employer doesn't match. That way, you are still getting the most out of the plan. "And of course" says Dlouhy "If you are self employed, you are not going to have the benefit of a matching contribution - you may want to contribute more accordingly or look into incorporating". The amount of your contributions will depend on your budget and your expenses, although contribution amounts can be changed fairly easily.

If your employer doesn't offer matching contributions to your 401k, they may be willing to participate in an exciting new savings plan. As of the beginning of 2006 your employer has the option of offering a Roth 401k instead of the regular 401k and preliminary figures suggest around 30% of employers would consider doing so.

And finally, as the saying goes, it doesn't hurt to ask. If your employer doesn't participate, seek out someone in your workplace who may be in a position to possibly change the policy.

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