It’s no secret that corporate America has been hit hard by the recent economic downturn.  Major corporations have been forced to make cuts across the board.  Executive salaries have been slashed, layoffs are becoming more and more common, and no one seems to be hiring.

Now another challenge has been handed down to those already struggling to secure their financial future.

According to a study released by CFO Research Services, a full 25 percent of U.S. employers have eliminated or plan to cut matching contributions to their 401(k) plans. It’s obvious why they are doing this.  They need to cut costs somewhere, and this is an easy way to do it.

What does the reduction in 401(k) contribution matches mean to you?

Traditionally, a 401(k) with your employer that provided matching contributions, more common than not, was a no-brainer when it came to saving for retirement.

Take the familiar Safe Harbor plan model used by many employers.  With this type of 401(k) the employer is required to match 100% of an employee’s contribution up to 3% of their salary. Where else can you get a guaranteed 100% profit on your retirement savings?

With so many employers ending their matching contributions it’s not such an easy decision.  Depending on your level of contribution, you might be better off contributing to your own IRA and freeing yourself from the restrictions that are often imposed by employer sponsored 401(k) plans.

A Traditional or Roth IRA allows you to contribute up to $5,000 ($6,000 if you are over age 50) every year towards your retirement.

According to the Profit Sharing/401(k) Council of America, the average worker contributes about 5 percent of their salary to their 401(k). With the 2008 per capita income in the U.S. of $39,751, this works out to an average 401(k) contribution of about $2,200. Take away a matching contribution the 401(k) loses much of its appeal.

And since you are the one deciding who holds the funds for your personal IRA, you have complete control over the investment choices available to you.

Imagine taking that $5,000 per year and investing in something that you actually know something about.  You are not limited to the limited choices of a select mutual funds from your provider.

You can utilize a truly self-directed IRA to invest your money in the vehicle of your choice.  Whether it’s real estate, oil and gas, foreign currency or live stock, it’s your choice.  The investment opportunities are nearly endless.

If you’d like to see how contributing to your own self-directed can help ensure your financial future, call one of our Retirement Plan Specialists.  We’ll help you put the pieces of the puzzle together.

Related posts:

1. Back to School with Equity University, Part II: Maximizing your Tax Deductions and Contributions
2. Is Your Employer Lacking a Retirement Plan for Employees? Explore Other Retirement Saving’s Options
3. Think that Self-Directed IRAs are Just for the Wealthy? Special Tax Credit will Make You Think again!

Filed under: IRA Consultation, IRA Contributions, IRA Education, Investing in Real Estate, Investment Opportunities, Managing Your IRA, Saving for Retirement, Traditional IRA, self directed IRA on July 2nd, 2009