What to Do if Your Employer Stops Its 401(k) Match
If other companies follow in IBM’s footsteps, employees will need to make some adjustments in their retirement savings.


In early November, IBM made news by announcing it would end the company’s 401(k) matching contribution, effective at the end of this year. IBM’s 401(k) plan offered a generous dollar-for-dollar match on the first 5% of salary from employee contributions. IBM is replacing the 401(k) match with a 5%-of-salary contribution to a retired benefit account (RBA), which appears to be essentially a cash balance plan. IBM says funds inside the RBA will earn a fixed rate of 6% for the next three years.
Why did IBM do this? This change allows IBM to switch its retirement contribution from a defined contribution of the company to a defined benefit of the employee. At year-end 2022, IBM had $53 billion in defined benefit assets and an overfunded pension of roughly $15 billion. The change will free up substantial cash for the company since the 401(k) match required current funding, while the RBA contribution may not require funding, given IBM’s overfunded pension.
IBM was one of the first large companies to adopt the 401(k) in 1984, so it’s possible other large companies with overfunded pensions may follow suit and end company contributions to 401(k) plans.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If your employer terminates its 401(k) match, what should you do?
Revisit the asset allocation of your 401(k) contributions. If the company 401(k) match shifts to a cash balance-type plan, like IBM, then it may be appropriate to increase the equity allocation of your 401(k). Cash balance plans offer a fixed rate of return, so think of this account as delivering bond-like returns.
Under a 401(k), the employee controls the investment allocation of both their contributions as well as the company’s match. Under a cash balance plan, the investment allocation of the company contribution is now under their control. It’s not uncommon for the annual company match to a 401(k) to equate to roughly 25% of the total annual retirement contribution for an employee. With that 25% now locked into bond rates of return, participants may need to be more aggressive in how they invest their 401(k) contributions going forward.
Increase your employee deferral. If the expected return of your retirement nest egg is reduced because of more bonds in your portfolio, you may need to increase your contribution rate to meet your long-term goals. Let’s assume you’re 25 years from retirement with a current 401(k) balance of $100,000 and you’re contributing $20,000 a year to your 401(k) with a goal of $2 million. If you earn a 7% annualized return, you’ll be nearly $200,000 short of your goal. Increasing your contribution by just $2,000 a year gets you to your goal!
Consider a Roth IRA. Roth IRAs offer an excellent savings vehicle. Unlike a traditional IRA, contributors don’t receive a tax deduction, but earnings and distributions are tax-free (with some holding period requirements). While there are income limits for making direct Roth contributions, the backdoor Roth IRA loophole enables those with incomes over the limit to still make such contributions. Backdoor Roth IRAs can be tricky, so be sure to consult your tax or financial professional.
Now, more than ever, achieving retirement security requires constant vigilance. A benefit that many employees took for granted may soon disappear, so if you aren’t already maxing out your employer match, now’s the time to start.
Related Content
- Benefits of Doing Roth IRA Conversions Early in Retirement
- Are Roth IRAs Really as Great as They’re Cracked Up to Be?
- Inflation Relief: Workplace Benefits Can Be a Big Help
- Can I Hire a Financial Adviser to Manage My 401(k)?
- Four 401(k) Mistakes to Avoid While Saving for Retirement
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Mike Palmer has over 25 years of experience helping successful people make smart decisions about money. He is a graduate of the University of North Carolina at Chapel Hill and is a CERTIFIED FINANCIAL PLANNER™ professional. Mr. Palmer is a member of several professional organizations, including the National Association of Personal Financial Advisors (NAPFA) and past member of the TIAA-CREF Board of Advisors.
-
Mortgage Rates Dip to Year-Low as Jobs Data Disappoints
With August job growth falling short of expectations, markets drive 30-year mortgage interest rates down, opening refinance and homebuying opportunities.
-
5 Multibagger Stocks With Amazing Returns in 2025
multibagger stocks Big change catalyzed by top tech disruptors often leads to big growth.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to Know
If you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both Worlds
Before investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)
An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client Reviews
Financial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop Investments
Truck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams Now
Beyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
While some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.