What to Do If Your Employer Stops Matching Retirement Contributions

When the economy takes a turn for the worse, some companies may pare expenses—including matching contributions to employees’ retirement accounts. It happened when the dot-com bubble burst in 2000, again during the financial crisis of 2008–2009, and most recently during last year’s pandemic-triggered recession.

As of June 2020, more than 11% of large companies had suspended matching 401(k) contributions as a result of the COVID-19 pandemic, according to the Plan Sponsor Council of America. Fortunately, such cuts are often temporary. However, when every dollar counts, they can still take a toll on your retirement savings.

So, what can you do if your employer scales back its contributions to your retirement account? You have a few options:

  1. Raise the stakes: One consequence of the pandemic is that savers are spending a lot less on costs like commuting and dining out. If you’ve got extra cash that normally goes toward other expenses, consider boosting your contributions to your workplace plan to make up for the loss from your employer—up to a maximum of $19,500 in 2021 ($26,000 for those 50 and over). If you’re already maxing out, consider saving more in an IRA or a taxable brokerage account.
  2. Keep it up: If you don’t have any surplus cash, at least try to maintain your current contributions. “Money is tight for a lot of people right now, but continuing to make regular retirement contributions is the best way to combat a reduced or suspended employer match,” says Rob Williams, vice president of financial planning at the Schwab Center for Financial Research. “Following your employer’s lead by reducing your own contributions would only compound the issue.”
  3. Review your plan: Sometimes we let our retirement plans run on autopilot, and that’s never a great idea. “Perhaps the loss of your employer match—even temporarily—can serve as a catalyst to review your goals and savings strategy, and determine if your current style of investing is still suited to your needs,” Rob says.

Whether your company has cut back on matching contributions or not, one thing’s for sure: “Sticking to your plan, even when times are tough, gives you the best shot at reaching your goal,” Rob says. “Your future self will thank you for it.”

Next Steps

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.