Doing more with less is hardly a new directive; we’ve all felt the pinch at work and I’m sure everyone reading this has a story to tell on that front. With the recent news of EMC’s temporary 5% pay cut and temporary suspension of 401(k) matching, people are talking about ways to lessen the impact at home. I know a lot of you are probably in similar situations.
The first thing I heard in the hallway was that you could easily stabilize your take-home pay by modifying your 401(k) contribution temporarily. Depending on where you are in life, that might be necessary, but especially considering the suspension of contribution matching and the low price of most retirement funds right now, it seems like a dangerous solution.
Playing around with a 401(k) calculator at Fidelity’s site, assuming you’re 25 years from retirement just losing the match for one year could cost you $20,000 in earnings. If a hypothetical employee making $80,000 also reduced his or her withdrawal by $4,000 for one year, the total impact on retirement would be closer to $50,000. The younger you are, the more likely that money will add up to even more.
That’s serious money to sacrifice. Is it worth it? Can you apply some other financial shortcuts to make do with less? If you haven’t yet, maybe now is the time to. And even if that’s not an option, there are other ways to boost your take-home. With the average US tax refund over $2000 dollars, I’d consider modifying your payroll withholding before your 401(k).