What is the downside if I stop contributing to my 401k for about 4 months?

Question

I am in a financial bind for the next 4-6 months and I am at my last resort of holding back my normal 401K deductions from my paycheck; or maybe just change it to 1% of my pay. Other than the obvious loss of money which my 401K grows with, are there any other negatives I am not aware of?

Answer 1

There may be a downside if you do not adjust your withholding.  You are going to pay more taxes by backing off on your 401k contributions.

Hope this is helpful.

Answer 2

little bit higher taxes for 2008

little bit lower of return in long run in 401k

Possibly missing out on match money.

Most important is to check the rules of the plan. Some still allow such changes only quarterly (although you can go to zero at any time).   If yours is such a plan then you may have to stay out the entire 6 months.  Make sure you get back in when the cash crunch ends.

This is far better than taking a withdrawal so no one should beat you up over this decision.

Answer 3

There are no other drawbacks, in terms of penalties or anything like that.  That said, make sure you contribute at least up to company match, as other wise you will just leaving money on the table./