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Our Money Coach, Bill Stanley, had a question: “Why aren't employees participating in their company's 401(k) plans?”

So, he did a small, informal and non-scientific survey – and wanted to share his findings with us.

First, Stanley said we need to give a little background about the 401(k) retirement plan. They first appeared in 1978 and, for the most part, have replaced the employer pension plans paid for by the company alone, he said.

“The money in the plan belongs to you,” he said. “So, when you change jobs, you can take it with you.”

In a traditional 401(k), part of our salary is set aside each payday. We don't pay tax on the contribution until retirement, he said.

“Some companies offer a matching contribution – which can be a big advantage,” he said.

All plans are different, and Stanley said we should check with our employer to find out how our plan works. But here's an example:

You make $50,000 a year and are allowed to contribute up to 10 percent or $5,000. Your employer matches up to 3 percent or up to $1,500 per year. That turns into a maximum of $6,500 each year – $1,500 of which is “free money” and equates to a 30 percent return on your investment. In addition, your taxable income is $5,000 less – which means there's a possible tax savings of $1,500 (in the 30 percent total bracket.)

This leads us back to his original question: Why doesn't everyone participate?

“The number one reason I hear is: 'There's no company match',” he said. “Some companies provide a match no matter what, but it all depends on each individual employer.”

For example, one client Stanley spoke with said she contributes the maximum percentage she can, and her company matches 75 cents for each dollar she puts into the plan. And, if the company reaches certain goals for the year, the company will double its match – which means she can receive $1,500 in “free money” for every $1,000 she contributes. That's definitely a good 401(k) plan, he said.

Two other clients he spoke with said their companies stopped their 401(k) matches over the past two years due to the economic situation and the company's profit picture. His advice? Employees in these two companies should gently ask their Human Resources director when the match will return; HR will, in turn, tell senior management that employees want the match back, he said.

A lack of a company match is a good reason to not participate in a 401(k), Stanley said, only if we contribute to our retirement by other means.

Other options include a traditional Individual Retirement Account (IRA) on a pre-tax basis (where we pay tax later) or in a Roth IRA on an after-tax basis – and never pay taxes again, he said.

“Or you can set aside money in a regular investment account,” he said. “Don't just let it fall into the family checking account because it will disappear.”

Bill Stanley and Money Matters airs every Tuesday on FOX21 Morning News.
If you have a question for Bill, contact him directly: MoneyCoachBill@aol.com