Becoming a full-time employee at a company with benefits gives you something worth more than your salary.
That’s especially true if your job comes with health insurance, which seems to get more expensive each year, and a 401(k) company match.
You have to contribute to a 401(k) plan to get a company match. But it also represents free, tax-advantaged money that goes toward your retirement.
With pension plans drying up faster than a puddle in a desert and uncertainty around Social Security benefits in decades to come, it’s one of the best available tools to help you save for retirement.
Just how good is a 401(k) match? And to what extreme should you go to ensure you take full advantage?
Getting the Full 401(k) Match: ‘Ultra-High Priority’
Money expert Clark Howard implores people to take advantage of every dollar of your 401(k) match. But should you prioritize securing your full company 401(k) match even if you’re facing potential bankruptcy?
That’s what a listener recently asked Clark.
Asked Kelly in Maryland: “My sister and brother-in-law are about to contact a credit counselor to consolidate their sizable credit card debt, which is great news and something I’ve suggested to them for years.
My sister’s employer matches 100% on the first 6% in her 401(k). Should she move heaven and earth to make sure she’s still contributing the 6% to get the free employer money during her time of repayment and perhaps even bankruptcy?”
You probably know what a 401(k) account is. But did you know that, typically, money in a 401(k) account is protected from bankruptcies and legal liabilities (such as money owed in a lawsuit)?
“I’m glad that they are now attacking the debt. And I hope that whatever plan they come up with is successful,” Clark says.
“[On] the original question. Yes. Move heaven and earth to get the full employer match. The 401(k) money is generally recognized in 50 states as a protected asset. And making sure you make the contributions to get the full employer match? Ultra-high priority.”
How To Find a Good Credit Counselor
Getting a credit counselor and attacking serious debt is a good financial move.
But you want to make sure you work with the right person. That’s also an important decision, Clark says.
“There are legitimate credit counselors. Illegitimate credit counselors. And ones kind of in a fuzzy middle,” Clark says.
“To find a legitimate credit counselor, Kelly, make sure your sister and your brother-in-law go to an affiliate of the National Foundation for Credit Counseling. NFCC.org.”
Final Thoughts
In many states, money in a 401(k) account is protected from bankruptcy proceedings and legal liabilities. You probably should prioritize securing your full 401(k) match even if you have to move heaven and earth to do it, Clark says.
