Should I Contribute to a 401(k) Without a Match?

There are pros and cons of both traditional IRAs and workplace retirement accounts. Learn which option is best for you!

Laura Adams, MBA
2-minute read

Should I Contribute to a 401(k) Without a Match?

by Laura Adams

Q. I have a 401(k) at work, but my employer doesn’t offer matching funds. The maximum I can afford to contribute to a retirement account each year is $5,500. So, should I contribute it to a traditional IRA of my choice, rather than to the 401(k)?

A. There are pros and cons of both traditional IRAs and workplace retirement accounts. Certainly, getting 401(k) matching funds is a benefit that no one should ever turn down. But besides that, here are 3 major advantages and disadvantages of each type of retirement plan to consider before deciding which one is best for you:

Advantages of an IRA

  1. Wide availability: Anyone with some amount of earned income can contribute to a traditional IRA.
  2. Withdrawal flexibility: You have more options for taking withdrawals from an IRA than from a 401(k).
  3. Extended deadline: You must make 401(k) contributions by the end of the year, but you have until April 15 of the following year to make contributions to an IRA.

Disadvantages of an IRA

  1. Low contribution limits: For 2013, the maximum you can put in an IRA is $5,500 or $6,500 if you’re 50 or older.
  2. No borrowing: You can’t borrow from an IRA the way you can with some 401(k) plans.
  3. Discipline needed: You won’t have an employer to make automatic payroll deductions for you, which is required for a 401(k).

Advantages of a 401(k)

  1. Borrowing: Some 401(k) plans allow participants to borrow their own funds and pay them back with interest over time.
  2. Legal protection: Workplace retirement accounts offer more safety from creditors than an IRA, if you file bankruptcy.
  3. Automatic contribution: Having funds deducted from your paycheck before you ever see them makes it easy to grow a large retirement nest egg.

Disadvantages of a 401(k)

  1. Limited availability: You must work for an employer that offers a 401(k) to have one.
  2. Limited investment options: You might not have a diverse menu of 401(k) investments to choose from.
  3. Limited withdrawals: In general, you can’t withdraw funds from a 401(k) unless you qualify for a specific financial hardship.


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10 Things You Should Know About 401(k) Plans
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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.