Financial Abundance Guide

If your employer offers an employer “match” to your 401(k) or 403(b) contributions, do everything possible to fund your account up to the full matching amount.

The logic behind this statement is covered in the Financial Abundance Guide, where I show how “Jeff” receives a 145% total return, in only 5 years, when his company matches his $6,000 annual 401(k) contribution. In five years, his $30,000 invested becomes $73,635, with only an 8% annual return.

In a recent Wall Street Journal article, Eleanor Laise found that the number of people participating in Fidelity Investment’s defined contribution plans had actually decreased from 56.9% in 2005 to 56.6% in 2006. This has occurred, in spite of the Pension Protection Act, which allows employers to automatically enroll employees, requiring them to “opt out” of the 401(k) plan.

Most employers have been slow to implement this approach, often providing “opt out” only to new hires. An explanation of why employers are being slow to implement this change is offered by Stephen Utkus, director of the Vanguard Center for Retirement Research: “If you (the employer) get more people to participate, you have to pay more in matching contributions, so employers have been slow to phase it in.”

To attain financial abundance, you must take control of your finances. If your employer offers a match to your 401(k) or 403(b) account, the total amount that is matched is “free money”. This “free money” can provide you with an immediate 100% return on your investment. If you are offered this “free money” use it, don’t lose it.