Dec. 30, 2022

It’s Always Worth Getting the 401k Match – Even If You Cash It Out

The other day I read that only about 33.6% of employees who have access to a 401k contribute to it. This statistic is just over a year old. I was shocked to see this number so low. It pains me to see that many people forgo free money (if there is a match), lower taxes and investment opportunities.

Real Life Scenario

I had a coworker at a previous job who had worked for the company for several years. She was from a different country, but the office in that location shut down. Luckily, she had arranged a transfer to our United States office. One day the topic of 401k’s came up, with someone asking about which funds to choose. She said she didn’t participate in the 401k. I asked her why, and she said that eventually she wanted to go back to her home country. She would rather have her money in a checking account, and avoid the taxes and fees associated with early withdrawal.


We were working in tech support, with new graduates making mid-50k and senior level workers around 100k, according to Glassdoor. She was in the upper middle by tenure and skill, so I figure she was making around 80k, but it’s safe to assume 70k+. Our company had a pretty typical setup. If you put in 6% of your paycheck, they put in 3%. That’s a 50% gain automatically. There was a four year vesting ladder, so each year you worked, you would get to keep an additional 25% of the employer match. She had been there long enough to be fully vested.

As far as fees go, there is a 10% penalty when withdrawing early from a 401k. No big deal in this case right? She’s still up 40%. Of course then you have to pay taxes and the withdrawal is considered part of your gross income. She was single and based on her general salary range would be in the 25% tax bracket. At most, this money would be taxed 25%, if not less through other deductions.

Even with the taxes and penalties totaling 35%, she would still be coming out 15% ahead just getting the employer match, not counting any gains through capital appreciation or dividends.

Contribute to your 401k. 401k match
Dave didn’t think of this, but that’s okay. Don’t beat yourself up too bad.


In my mind, there is no excuse for not at least getting an employer match when it is available. Even if the 401k was going to continually be raided and withdrawn early, the majority of people would still come out substantially ahead. Of course, it’s much better to just leave the money to compound and grow, but depending on your situation, this is a viable option. There are some instances where Dave Ramsey will encourage listeners to stop contributing to a 401k entirely to focus on debt reduction. For many people, depending on their company match and overall income, it actually makes more sense to contribute, get the match, and then raid the 401k.

How does your 401k match work? Are you taking full advantage of it?