JUST WHEN YOU thought things couldn’t get worse for your 401(k), your employer announces the company will no longer make matching contributions to your fund. That’s what more and more working Americans are learning, according to the BNA.
Most 401(k) plans have experienced significant investment losses over the past several months as a result of the ongoing global recession. And in recent months, a growing number of companies have announced they are temporarily cutting expenditures by either reducing or eliminating their matching contributions to those plans.
Even a temporary reduction in contributions can have a significant effect on an employee’s retirement savings. Some analysts say these cuts are coming at just the wrong time. Workers have seen their investments dwindle as the prices of stocks purchased during the bubble have been slashed. Now, when stock prices are low and therefore more likely to rise a great deal over the long term, their employers are holding back contributions. The long-term effect could be significant.
On the other hand, most companies say the 401(k) reductions are an alternative to layoffs, and that with the country in the worst recession for many decades, cost-cutting is the only way for most of them to stay in business.
