Earlier this year I decided to stop contributing to my company’s 401(k) plan. At the time, my plan made sense (at least in my head): I’d take the extra money ($36.92 after taxes) each week and put it towards my student loan. Then by the end of 2014, my student loan would be paid off! My employer contributes 6% every week, regardless of whether or not I contribute, so I’m not losing any “free money”. And I’m already 100% vested in the program. It would all work out swimmingly!
Except it’s mid-November now, and I still have $5,000 to go before my student loan is paid off. An expensive vacation, job loss, and life in general managed to derail my original plan. The last couple of months have had me thinking that maybe it would be a better idea to start contributing to my 401(k) plan again. Sure, the extra money each week was helpful. And it’s not like I’m blowing it, or using it irresponsibly. But that $36.92 every week added almost $53 dollars a week to my 401(k) balance. Add in interest, and dividends… Wouldn’t it be better in the long run to be socking that money away?
I was just about ready to sign on the dotted line when our company’s 401(k) plan got audited. And, as it turns out, there was a problem. It’s probably been close to 2 years since our company’s 401(k) was merged with our parent company’s plan. Since that time, our company has had very little access to the plan. Sure, each individual can check their account information and make changes online. But all the internal checks that are supposed to take place no longer happen within our company; They’re all done by our parent company. Or, so we thought. But as we were preparing for our fiscal year-end, a long over-do audit turned up missing contributions. One week’s worth of employee contributions were paid into the plan, but never credited to the employee’s accounts. Our parent company looked into their accounts and realized they were missing employee contributions as well, on totally different weeks than us. And their parent company? Same thing!
I have to admit, I’ve been a little psycho about checking my 401(k) balances most of this year. I’m constantly recalculating my net worth, and as part of that, I’m keeping close tabs on how my retirement accounts are doing. The market has been pretty all over the place this year, so I’d gotten into the habit of checking each month to see if my employer’s contribution had been added, instead of just checking the balance. But I’m only getting the monthly employer contribution right now. Back when I was contributing to the plan, I was a little less diligent about checking my own contributions each week. And apparently, so is everyone else; Of the hundreds of people participating in the plan, across multiple companies, no one noticed the missing contributions!
Apparently there is one woman from the company that administers our plan who is responsible for crediting each individual’s account and making the purchases of shares. She laughed it off as a minor oversight, updated the accounts, and moved along as normal. The market was low when the error was corrected, so people were getting more bang for their buck, after all! Very few people know that any of this happened. I wasn’t personally affected, since it was only happening with employee contributions, and I wasn’t contributing. The rest of the people who knew were all in high level management positions, and didn’t feel like their position enabled them to complain. Everyone was waiting for an employee to notice and raise the red flag. But no one did.
All of this makes me a little apprehensive about contributing to the plan again. Sure, I could join the plan, and just make sure I’m really diligent about checking that my contributions are being credited to my account each week. But I don’t really trust now that everything is kosher with our 401(k) plan. What about the things I can’t see, like management fees? Am I just being paranoid? Finding excuses not to contribute? Or is this a valid concern?
Part of me says that I should keep my money out of the plan, for now. If I feel like contributing to retirement is a priority right now, I could always setup an IRA with Vanguard. I want to do that eventually anyways, so I can roll over my Roth from Edward Jones. But then, I’d need a chunk of cash to get things started. I don’t really want to take money from somewhere else to put towards an IRA. And I’m bad about the whole “divide and conquer” approach to savings. Contributing to the 401(k) would be so much easier and more effective. But it also would make me feel kind of uneasy.
What would you do in my situation? Contribute to the 401(k)? Set aside money for an IRA? Continue to prioritize debt repayment?
– Cindy W.