05/27/2009 05:12 am ET Updated May 25, 2011

Five Things to Remember if You Lose Your 401(k) Match

A growing list of employers have reduced their matching contributions to workers' 401(k) accounts as they struggle to preserve cash in the recession. But here's how bad it's become: Even AARP has suspended its 401k match for the rest of 2009.

When the nation's most prominent defender of retirement security stops matching employee contributions, you know there's trouble in River City.

One-third of U.S. employers have reduced or eliminated their matching contributions to retirement accounts since the start of 2008, according to Spectrem Group, a retirement benefits consulting firm. Another 29 percent plan to do so this year, Spectrem reports.

Experts hesitate to predict whether the trend is temporary or marks a permanent change in employer behavior. But let's not lose perspective. Even if your employer reduces or eliminates matching contributions, it's important to have a plan for retirement saving -- and stick to it, to the extent possible.

At the same time, a reduction or loss of employer matching contribution should prompt some reevaluation of your plan. I spoke with a range of experts on retirement saving over the past few weeks about this disturbing trend, and broke it down to the five most important things to consider if you find yourself matchless.

1. Stay positive. Don't take your employer's decision to cut back as a signal that you should, too. "People do take signals from their employers on things like this," says Steve Vernon, a financial planner and founder of Rest of Life Communications. "Your employer's decision to preserve cash has nothing to do with your retirement saving strategy."

2. Can you still hit your target? Mutual fund giant T. Rowe Price advises retirement savers to try to put away 15 percent of their total income each year. If your employer's match amounted to 3 percent of that total, examine whether you're in a position to make up the difference -- inside your 401(k) or using other retirement savings vehicles.

3. Traditional or Roth IRA? If your employer's match has been reduced -- rather than eliminated -- it makes sense to continue contributing to the level of your match. Or, if you're married, make sure your spouse is contributing enough to get the full employer match, suggests Scott Holsopple, president of Smart401k, a web-based retirement plan investment advisor.

Beyond that, consider using a Roth IRA to hit the rest of your annual target. Unlike a traditional IRA, you can't contribute pre-tax dollars to a Roth. Instead, you pay the taxes upfront in return for much greater flexibility in withdrawals in retirement. There are income eligibility limits but most U.S. households qualify under the current rules.

4. Auto-escalate. If you are sticking with an unmatched 401(k) but economic hardship makes it impossible to make up the entire difference right away, check to see if your employer offers an automatic contribution escalation, which lets you increase our contributions in pre-set increments of 1 to 2 percentage points annually.

5. Keep paying attention. The economic crisis has served as a wakeup call for millions of Americans who haven't paid much attention to planning their retirement. "The level of individuals' involvement and engagement with retirement planning is really rising," says Catherine Miller, vice president of 401(k) education at Charles Schwab. Even if your employer is cutting the match, a growing number are offering advice, services and tools to help you make informed decisions.

I've posted more details on 401(k) matches, along with decision-making tools, over at