One of the biggest questions I had when I began to take saving for retirement seriously was whether or not I should contribute to my 401k. My employer did not match any contributions at the time, and without a company match I wasn’t sure it was worth it. I used this lack of a match as an excuse to look into the subject no further. In doing so, I cost myself years of compounding interest and, as it turned out, impressive gains in the stock market.

So the short answer is yes, you should still contribute to your 401k without a company match. Probably. Though there are a few things I’d recommend doing first.

What to do before contributing to a 401k without a company match

If you have high-interest debt in the double digits, you should work to eliminate those first. These most often come in the form of credit cards, which are charging insane interest rates in the high teens or even low 20s. Make those your top priority.

In my case, I focused on paying off student debt, with interest rates ranging from 5-7 percent, slightly less than the historical gains you’re likely to find in the stock market (via VTSAX or an S&P 500 index fund). I regret not contributing to my 401k simultaneously while paying down debts, but ultimately getting out of debt is never a bad thing.

If you have no debts to speak of, or small amounts of debt with single-digit interest rates, the next step is to make sure you have a bit of a cushion in the form of an emergency fund. Depending on, well, your dependents, this amount will vary. For a single person in their 20s or 30s, a couple grand will do the trick to get you started.

Take advantage if your employer does match your contribution

After that, you can circle back to that 401k—if your company provides a match. If you get an employer match, you should absolutely cash in on the free money that your company is paying you. I consider this amount, whatever it may be in your case, to be part of my salary, I just need to save a little bit for my own retirement in order to unlock that portion of what is owed to me.

If your employer does not offer a company match, it still doesn’t hurt to contribute a small amount of your paycheck to get the ball rolling. Even 1%, which you are likely to not even notice or miss, ensures that the account is set up and ready for you when you are in a position to increase your contributions.

Look to the Roth IRA before the 401k

Before you increase those contributions, I would first look to your Roth IRA. Here, you’re contributing after-tax dollars that don’t come directly out of your paycheck, so you’ll have to set this up yourself rather than rely on your company’s HR department. But it’s incredibly simple these days, via Vanguard or Fidelity or Schwab or any other online broker, so you have no excuse.

As long as you make less than the IRS income limit ($139,000 in 2020), you can contribute up to the maximum of $6,000 to your Roth IRA. Since we’re in this for the long haul, you won’t touch that money until after your 59 year and six month birthday, at which point you’ll be able to withdraw all of those gains tax free.

After maxing out your Roth IRA, the time has come. And now yes, you should contribute to your 401k even without a company match.

Reasons to contribute to your 401k with or without a company match

Why are we contributing to our four-oh-wunk again? Well, for a variety of reasons. Ultimately, we want to make use of any tax advantaged savings options available to us. In the case of a 401k, your contributions and the money that they make you over time are tax-deferred, so you are kicking the can down the road on paying the tax man. Ideally, you’re kicking that can to a time when you’re no longer working, and those fall in a lower income-tax bracket than you find yourself in during your working and earning years.

Another reason to embrace the 401k, regardless of your penny-pinching employer, is that said employer is involved in this account to begin with. The ability to take this money right out of your paycheck allows you to put your contributions auto-pilot. Because the money leaves your paycheck pre-tax, you’re saving more than it feels like when you go to cash your check. So a $100 contribution may only account for $60-70 less on each particular paycheck.

Don’t be afraid to ask

And if your employee doesn’t match contributions, you have one more option: ask them! Simply showing an interest in your 401k may be enough to energize your payroll manager into action. Can’t light a fire without an employer match!

As of 2020, you can contribute up to $19,500 your 401k. If you’re able to max out a Roth IRA and a 401k for the duration of your working life, you’ll be sitting pretty. Most likely, you’ll find yourself in a position to cut the working portion of your life short. Easier said than done, sure, but a good goal for savers nonetheless. With just these two accounts, you’d be saving half of the average salary for recent college graduates (roughly $50,000). A 50% savings rate is the express lane to financial independence.

Should you contribute to a 401k without a company match?

To answer the question, once and for all, yes you should contribute to your 401k with or without a company match. You may have other tasks to tick off the personal finance priority list first, but don’t allow the lack of a match to turn you away from the 401k entirely, as I did.