Data show that roughly 70 million workers participate in an employer-sponsored 401(k) plan as a key retirement savings vehicle, and 401(k) matches offered by many employers help boost those savings each year.
A Vanguard How America Saves report estimates the average employer match in the United States at about 4.6% of pay, in addition to employees’ own contributions.
For someone earning $75,000 a year, that amounts to roughly $3,450 in additional tax-advantaged retirement savings annually. Some workers consider this effectively “free money” on top of their regular pay.
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But…some employers have begun pausing or reducing matching contributions as they review benefit costs and overall spending.
For example, $2 billion customer experience company TTEC reportedly told employees it would suspend its discretionary 401(k) match through the end of 2026. Sherwin-Williams previously paused its match during a cost-cutting period and has since resumed it. In recent years, IBM has moved away from a traditional matching structure to a Retirement Benefit Account (RBA) defined-benefit plan, while still reportedly allowing employees to contribute to their 401(k)s.
The details surrounding these and other similar situations vary, but the outcome for workers is generally the same. There’s less money going into their retirement accounts from their employers.
That leads to a key question for those affected: What, if anything, changes for your taxes and savings when the 401(k) match goes away?
Why some companies are suspending 401(k) matches
Employer 401(k) matches have long been a core part of workplace compensation, even though they do not appear on a paycheck.
A study by the Employee Research Benefit Institute (ERBI) found that a majority of employees are more likely to participate in a retirement savings plan if there’s a company match. Other data from an American Century Investments survey suggest that more than a third of respondents would take a 401(k) match over a salary increase.
But recently, some companies have begun scaling back or pausing these contributions as part of broader cost reviews.
Data from the U.S. Bureau of Labor Statistics show that benefits make up a significant share of total compensation costs. As a result, retirement contributions are sometimes adjusted alongside other expenses.
Should you still contribute to a 401(k) if there is no employer match?
Traditional 401(k) contributions still reduce taxable income in the year they’re made, and investments continue to grow tax-deferred until withdrawal. So even without an employer match, you still get the same tax deduction on your contributions, but you lose the additional tax-deferred dollars your employer would have added.
Even so, some workers continue contributing to capture the tax break.
For example, someone in the 22% federal tax bracket who contributes $15,000 without a match could potentially lower their federal tax bill by about $3,300 before factoring in state taxes.
At the same time, the loss of an employer match is prompting some workers to reassess their strategy. One approach is to maintain their contribution rate to stay on track with retirement savings. Another is to scale back to preserve take-home pay or prioritize other financial goals.
In some cases, a shift in the employer match pushes employees to consider savings options aside from a 401(k). For example:
- A Roth IRA doesn’t offer an upfront deduction but may provide tax-free income later in retirement.
- Some may also pay closer attention to Health Savings Accounts (HSAs) if they are available through employer health plans.
- A key benefit of HSAs is that they allow eligible workers to contribute pre-tax money toward medical expenses. Additionally, investments can grow tax-free, and withdrawals used for qualified healthcare costs are also generally tax-free.
HSAs aren’t a replacement for retirement accounts, are subject to contribution limits and sometimes involve “hidden costs”, but they can provide another way for some households to lower taxable income and build longer-term savings.
401(k) tax benefits: Bottom line for retirement planning
When employer matches disappear or shrink, some workers may need to contribute more of their own money to stay on track for retirement. And while the changes might look relatively small year to year, losing thousands of dollars in annual employer contributions can affect long-term retirement balances.
For example, for a $75,000 earner losing a 4.6% match (~$3,450/year), that gap over 20 years at a 6% average rate of return could compound to $135,000 less at retirement.
So, what can you do? If your employer suspends or reduces its 401(k) match, your approach to saving might need to shift.
- If you were only contributing enough to get the match, you might want to revisit your contribution rate.
- If you can afford it, increasing contributions could potentially help keep you on track.
- However, if your cash flow is tight, it may make more sense to hold steady while prioritizing emergency savings or high-interest debt.
Overall, though, it’s important to keep in mind that without an employer match, there is no one-size-fits-all answer when it comes to next steps.
Saving decisions depend, as always, on your personal budget, tax considerations, and long-term financial goals.
Note: Because everyone’s financial and tax situation is different, keep in mind that this is general information, not personal advice. Consult a tax professional or financial adviser to determine the best course of action for your individual circumstances.