Released: March 07, 2007

Don’t ignore retirement plan matching funds

Source: Sandra Block, USA Today (Free Registration)

The past few days have provided a painful reminder that the stock market is no place for sissies. Stocks and stock mutual funds can fall in price, sometimes dramatically, which is why you’re not supposed to invest money that you need any time soon. But in these troubled times, there is a way to earn a guaranteed return of up to 100% on your investment. How? Take advantage of the company match on your 401(k) contributions.

A new survey by Mercer Human Resource Consulting found that employer matches are becoming more generous. Mercer found that 36% of plans offered a 100% match in 2006, up from 26% in 2002. (See box.)

This is free money, but it’s not a free lunch. Companies are generally increasing their matches at the same time that they’re reducing or eliminating traditional pensions, notes Patricia Pou, a partner at Mercer Consulting.

Last week, for example, FedEx announced plans to cap benefits from its traditional pension plan in 2008 and switch to a cash-balance plan. A cash-balance plan is a portable pension that combines features of a traditional pension and a 401(k).

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