The company offers 401(k) but doesn't match your contribution at all. In this case, it worth investing in 401(k)? For what reasons might a 401(k) be preferred over an IRA if there is no match?

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    As stated, this comment is too broad for a reasonable answer. This must necessarily depend on a lot of other factors like your age, overall wealth, goals for retirement, etc.
    – user32479
    Commented Jan 4, 2016 at 1:05
  • If there's no employer match, I think a Roth IRA is the best option, unless you really need the tax deferral or have already made your maximum contribution for the year.
    – aroth
    Commented Jan 4, 2016 at 6:01
  • I've narrowed the question in an attempt to keep it open. If you have a more specific question about what types of accounts might be best for you personally, ask a new question and include more details about your situation.
    – Ben Miller
    Commented Jan 4, 2016 at 13:51
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    @BenMiller Should I contribute to my 401k with a high expense ratio and no matching? is quite similar in my opinion. Commented Jan 4, 2016 at 21:52
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    @JoeTaxpayer It's very similar, although that question focuses on the fact that the OP's 401(k) has bad investments, so the answers deal with that. Another similar question is this one, but in it the OP is comparing investing in the 401(k) vs. not investing at all, and the answers deal with that. Our question here is the only one really comparing 401(k) with no match vs. IRA. I'd leave all three of them open.
    – Ben Miller
    Commented Jan 5, 2016 at 23:38

2 Answers 2


Besides the employer match, a 401(k) plan has other benefits that IRAs do not have:

  • A 401(k) is convenient. The investment is automatically taken out of every paycheck. This encourages setting an investment plan and sticking to it. For some people, it can be tempting to skip planned investments into an IRA.

  • 401(k) plans can have higher annual investment limits. If you would like to invest more than you are allowed in an IRA, your company's 401(k) might allow you to do this.

  • 401(k) plans have no upper income limit to be eligible to contribute. If you make too much money to contribute pre-tax to an IRA, you might still be able to invest in a 401(k).

  • 401(k) plans sometimes allow you to borrow your own money from your 401(k) and pay yourself interest. I don't recommend this practice for a few reasons, but this is an option that you don't get with an IRA.

  • Under certain circumstances, a 401(k) can allow you to retire early and withdraw at age 55 vs. 59-1/2 with an IRA. (Thanks @JoeTaxpayer)

However, 401(k) plans also have downsides. Inside a 401(k), you are generally limited to a handful of investment fund options selected by your employer. With some plans, you might find that your only investment options come with high expenses. With an IRA, you can invest in almost anything you want.

The employer match is the biggest benefit to the 401(k). But even without it, the 401(k) could still be the best option for you.

For a very broad overview of different retirement accounts in the U.S., see this answer. If you have a more specific question, feel free to ask a new question.

  • Also a 401k still gives tax-advantages (details depend on the type of 401k), but that is basically free money in and of itself Commented Jan 4, 2016 at 5:23
  • Well, you pay tax on all money you take out later in a traditional 401K. If you believe the US is headed towards higher tax rates in the future or you believe you will be paying higher taxes when you retire, max out a ROTH IRA (or ROTH 401K) first. Commented Jan 4, 2016 at 13:28
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    @TomCabanski If you believe the US is head towards higher tax rates. You mean when ;)
    – Ross
    Commented Jan 4, 2016 at 15:50
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    Even if rates overall are higher, you may be withdrawing at a rate that results in a lower tax bracket. The taxes you defer when contributing to a 401K are at your marginal rate. Commented Jan 4, 2016 at 20:46
  • Great answer. I'd just add that doing both a 401(k) and an IRA is quite possible. For many people, the right way to go is with a maxed our IRA and then as much 401(k) as possible. With a bit more work you can find what is right for you.
    – rhaskett
    Commented Jan 4, 2016 at 21:57

There is a possible case where a person might opt to not use the 401k at all.

If your income for the year is higher than the tIRA deduction limit, which probably means your tax bracket is in the +25% range, and you want to lower your tax on income this year, you might opt to contribute $0 to the 401k plan, and contribute to the tIRA the full amount ($5500 in 2018).

If no contributions have been made to any 401k plan through any employer for the year (Box 13 on your W2), then you are able to deduct the tIRA contribution for its full amount in your tax filing. Be aware, this includes Employer and Employee contributions total for the year.

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