Feature

When 401(k)s make us poorer

For the many who can’t afford to defer a portion of each paycheck, 401(k)s are a raw deal, said Stephen Gandel at Time.com.

Stephen Gandel
Time.com

We’re often told that if you don’t contribute enough to your 401(k) to get the full match from your employer, you’re giving up free money, said Stephen Gandel. “Well, it turns out that money isn’t exactly ‘free.’” In a sense, it’s coming “right out of your paycheck.” A recent study of 401(k) plans found that workers at companies that contribute to retirement plans tend to have lower salaries than workers at companies that don’t. The salary difference is “roughly equal” to the size of the employer’s potential contribution. This is particularly unfavorable for low-income workers.

According to one recent analysis, just half of workers making $30,000 or less participated in their companies’ 401(k) plans, compared with 90 percent of those making over $100,000. Unless those low-income employees sign up for the savings plan, “working at a company with a generous 401(k) plan will actually make them poorer.” It’s tempting, perhaps, to say that workers have only themselves to blame for not taking advantage of all available retirement benefits. But for the many who can’t afford to defer a portion of each paycheck, 401(k)s are a raw deal.

Recommended

A surge in violence in Pakistan
The rubble of a Peshawar mosque damaged in a suicide bombing.
Feature

A surge in violence in Pakistan

The Adani Group scandal, explained
Gautam Adani.
Briefing

The Adani Group scandal, explained

China says it successfully cloned 3 'super cows'
5 cows lined up at feeding trough.
carbon copy

China says it successfully cloned 3 'super cows'

Japanese restaurants fight back against viral 'sushi terrorism' trend
Photo of Kura Sushi, a Japanese conveyor belt sushi restaurant chain
save the sushi

Japanese restaurants fight back against viral 'sushi terrorism' trend

Most Popular

Republicans oust Ilhan Omar from House committee
Rep. Ilhan Omar (D-Minn)
Punitive politics?

Republicans oust Ilhan Omar from House committee

Japanese restaurants fight back against viral 'sushi terrorism' trend
Photo of Kura Sushi, a Japanese conveyor belt sushi restaurant chain
save the sushi

Japanese restaurants fight back against viral 'sushi terrorism' trend

China says it successfully cloned 3 'super cows'
5 cows lined up at feeding trough.
carbon copy

China says it successfully cloned 3 'super cows'