Personal Finance

My employer offers an incredibly generous 401(k) match but I don't want to wait until 60 to spend my money - is there another way?

Kristin Hitchcock

Published: November 30, 2024 8:59 am

Last Updated: February 13, 2025 7:43 pm

It’s not every day you get a 401(k) with a 100% employer match, but that’s exactly the situation I ran across in a recent Reddit post. While the 22-year-old poster was eager to take advantage of the match, they were very hesitant about locking thick money away until retirement.

Their dilemma? How to save for long-term goals like retirement while also keeping some money accessible for other big milestones, such as buying a house.

This is an issue I run into all the time with young professionals. They’re trying to balance retirement savings and shorter-term financial goals. Luckily, they can do both effectively. 

The Power of the 100% 401(k) Match

First, let’s examine why I absolutely recommend that this Redditor take full advantage of the 100% match. A 100% 401(k) match is essentially free money. For every dollar this user puts into their 401(k), their employer will contribute another dollar. This can dramatically grow their retirement savings over time, thanks to compound interest. 

Yes, they cannot receive this money until they’re 60. However, it’s unwise to pass up what’s basically free money!

The Roth IRA Advantage

The Redditor reports that they prefer their Roth IRA because they can withdraw from it. Roth IRAs are fantastic for young savers because the money grows tax-free, and unlike traditional 401(k) accounts, you can withdraw your contributions (but not earnings) at any time without penalty.

This does allow some flexibility. However, I wouldn’t plan on withdrawing from a Roth IRA habit. It’s best to let retirement stay retirement. 

So, how should they balance contributing to both a 401(k) and a Roth IRA while also hitting other financial milestones? Here’s what I’d recommend:

My Suggestion: A Two-Pronged Approach

I’d recommend the Redditor go with their instinct to invest in their 401(k) and another account for other goals. Here’s why:

• Max out that 401(k) match: It’s hard to overstate how valuable a 401(k) match is. At the very least, contributing enough to get the full match is a no-brainer, even for a 22-year-old who wants more immediate access to funds. They don’t specify how much the employer matches up to, but I’d recommend that be their target. As I’ve discussed before, you really can’t put too much in a 401(k).
• Diversify with a taxable investment account: For long-term goals that aren’t quite as far off as retirement, like buying a house, I’d recommend a taxable brokerage account. This type of account doesn’t have the same restrictions as a 401(k) or an IRA. Plus, it offers the most flexibility with investment choices, allowing them to do what they need with the money.
• Continue contributing to the Roth IRA: I don’t think the Roth IRA should be a “withdrawal whenever I want” account. However, I’d still recommend contributing to it for retirement. Still, this account does provide more flexibility than a 401(k). 

Remember, this is just my opinion, not financial advice!