Roth If You Can’t Match

A few weeks ago, we wrote about checking to see if your employer offers matching contributions to your 401K and, if they do, making sure that you start contributing.  The economic downturn, however, has led many employers to cut benefits, and matching contributions have been frequently one of the first ones to go.  If you find yourself in this situation, stop contributing to your 401K account immediately.  Instead, open a Roth account and start saving towards retirement there.  Click here to learn the difference between these two accounts.

Like your 401K , your investment options for Roth range from CDs to bonds to stocks.  You are only limited by the investment firm you choose.  Companies, such as Fidelity, Vanguard, and T. Rowe Price, have fund options that do not charge sales fees or commission.  There might be, however, initial deposit requirements ($3,000 at Vanguard), minimum monthly contribution requirements ($200 per month at Fidelity) and annual fees if the account is below a certain threshold ($10 a year at T. Rowe Price for mutual fund accounts with balances of less than $5,000).

As for the 401K account, you have the option to roll it over to a traditional or Roth IRA when you terminate employment.  But for now, just let the money sit and grow.  While these retirement funds have been hit hard, the economy is rebounding and good news is all around.  Just this quarter, my account actually accrued earnings!  Soon enough yours should too.

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