Episode 50: Are 401(k)’s Really Worth It?

Published: August 30, 2021 | Updated on: September 14, 2021

Thank you for joining us for episode 50 of our Money Wisdom Question Series. Today’s question is, “Are 401(k)s really worth it?”

Are 401(k)’s A Worthwhile Investment?

Yes! A lot of people are hesitant maybe to save money to their 401(k) plan at work, but this is a huge missed opportunity. When people try and time the market, they usually time it wrong. Unless they’ve got a crystal ball (and if you do, please loan it to me!) A 401(k) is a great investment tool because you’re not even thinking about when you’re going to save into it. Instead, you automatically save into it as you get paid.

If you open a 401(k) with your employer, you can put money into it. And if you’re getting a match, that’s even more of a benefit to you. A 401(k) is the investment vehicle available to you at work that makes it so that every time you get paid, money goes in. To me, the most important thing about retirement savings that you are always saving. We say to folks all the time, even if you have to decrease your contribution to the 401(k) – which hopefully you don’t. But even if you’re only putting in $20 a month, that consistent savings is compounding and building. This is what’s going to put you in a place where you can retire. So for one case, a 401(k) can be a great tool.

When You Get Closer to Retirement Years

It’s important to note that when you get to retirement, you’ve got to look at whether it makes sense to move money out of your 401(k) and roll it into an IRA. Why would you do that? First of all, for anything relating to your personal financial situation, you should address this with a professional who can help you make the best decision for you. A 401(k) is designed for saving money over a long period of time. And when you hit retirement, hopefully you have amassed enough money that you can actually retire.

However, 401(k)’s and other investment products that are used to grow money for retirement aren’t necessarily the best ones to use in retirement. At that point, you’re no longer saving money and you’re probably taking money out. On top of that, your risk is probably lower because you need that money now and don’t have 30 years to wait for it. A lot of you work for employers that allow what’s known as an in-service withdrawal, where you can move money out of a 401(k) into an IRA. The benefit to this is flexibility and control as you get closer to retirement years.


Maybe these products make sense for you financially, and maybe they don’t. But it certainly makes sense to have a conversation with someone who can advise you on this because you might be missing out on an opportunity that might be better for you or safer for you. So have that conversation, but definitely don’t miss out on the opportunity to save into your 401(k).

Thanks for joining me and I hope you found this information helpful!

P.S. If you enjoyed this topic and want to learn more, download your copy of our offer, “The Ultimate 401(k) Guide”.

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