I currently have a debt of around 40k between student loans and car. Both are being paid, and most of the time paid ahead/extra. But they are still taking a while and gaining interest of course.

Since I was comfortable making the payments with some money to spare I decided to take advantage of my employer match and contribute 5% pay to my 401k, matched fully.

This was about a year and a half ago, since then I've began to care more about my finances and reread the terms of my 401k. I found in the not so small print that you have to become vested to earn the employers match, which happens after 3 years, if you leave before then you get 0% match.

Now, I do not intend to stay at this company for another year and a half. I'm not going to leave for the sake of leaving but if I do leave I will likely get a substantial pay raise, offsetting the loss of the match and more.

My question is, should I stop investing in my 401k now since it is no longer being matched, and put it toward my debt instead?

EDIT: Here are some numbers to help. I make $52,499 a year. I put $2,100 into 401k a year (Not quite 5% apparently I didn't update since raise). Can't seem to find my current 401k balance but those numbers would mean it's probably $2800ish pre match, matched would double it. Interest rates on my debts are from 3-6% averaging about 4.5%.

  • How quickly will your debt be paid off in both scenarios? In other words, how much time will be taken off of your debt if you halt your 401k contributions?
    – Ben Miller
    Dec 14, 2016 at 15:46
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    Do read the fine print one more time. Many 401k plans allow partial vesting (25% or 33%) after one year, more vesting after two years etc. Some particularly bad ones insist on 0% vesting until you have worked for three years (when they must vest 100%) and perhaps your 401k is of this latter type. Dec 14, 2016 at 15:59
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    @DilipSarwate yes sadly I read it many times to make sure as I was pretty shocked to see it, but indeed no partial vesting only full at 3 years.
    – DasBeasto
    Dec 14, 2016 at 16:01
  • How much are you currently paying on your debt?
    – Ben Miller
    Dec 14, 2016 at 16:16
  • Matching 401k is free money (up to the matching maximum)! Also, make sure you are paying the minimum payment for the largest debt, and pay all extra/ahead toward the smallest debt. This way you can then snowball your way through your debts, and pay it off faster. Dec 14, 2016 at 21:11

2 Answers 2


I can only tell you what I did in my own case, and it worked out really well. When I had a match I contributed up to the match percentage, but not more. Our household income crosses into the 33% bracket, so if my wife or I contributed $1000, it only costs us 670 while gaining 2000. That was too good to pass up.

However, when I did not have a match, I did not contribute and dedicated all of that money to debt reduction. One can make a mathematical case for this not being the best idea, however, there are behavioral side effects that are of far greater benefit.

You will want to get out of debt sooner if you are not contributing to retirement. It will act as a motivational tool to increase income, increase payments, and decrease spending.

It will help you build wealth faster. Your greatest wealth building tool is your income. Once it is not nerfed by interest payments, you will have more to build wealth. Also currently compound interest is working against you.

Given your income you don't receive much tax benefit from contributing to a 401K, and you have a defacto no match as you will leave before the vesting period I would suggest not contributing. Instead pay down your debt like crazy. Shoot to be out of debt in 2 years. You might have to take on a second job to do so, but it is well worth it.

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    +1, but OP is single, so he's probably just in the 25% bracket. I'd strongly suggest he look at his 2016 tax return in a few months to understand his bracket, and one he kills off this debt, decide whether to save in a traditional IRA or Roth. Dec 14, 2016 at 16:34
  • Shouldn't whether he should get out of debt or not depend on the rate of interest he's paying? He might have better expected return on investment than what he gets back in interest, which means he looses out by paying back. Not too unlikely considering where the interest rates are right now.
    – SMeznaric
    Dec 14, 2016 at 17:26
  • @SMeznaric I added a bit about my interest in the OP, it's roughly 4.5% average across my loans)
    – DasBeasto
    Dec 14, 2016 at 17:48
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    I think this may be the route I go, it makes sense to me and I agree the psychological effect of watching the debt go down faster will make me want to pay it even more.
    – DasBeasto
    Dec 14, 2016 at 17:48

Given that it sounds like there are not any specific plans to leave the company (just a feeling that you probably will), I think you ought to continue to contribute up to the company match. Two reasons: 1) even if you don't vest, you will still get your contributions. They can't take that away no matter what. Getting into the habit of saving is almost never a bad idea. 2) 18 months can go by in a hurry. I think you can always do the math if and when you start pursuing new opportunities what the offer would need to be to make up for giving away the vested match. But until you have something in hand, I think you should not be setting aside opportunities for what is essentially free money. There is always the possibility that your current company will be that next big opportunity, and then you may regret not taking fuller advantage when you could have.

  • This is a very good point. I must say it is a bit more than a feeling that I will leave, I am simply waiting until after the holidays to begin searching, but I will also be waiting for the right job I'm in no hurry to leave. So you are right that time could fly by and I end up at 3 years. I guess I'll have to do the math and weigh the odds more. Thanks.
    – DasBeasto
    Dec 14, 2016 at 17:50

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