Should I Contribute to My Employer’s Retirement Plan? A First-Gen Guide

Congrats on the new job! Between onboarding and going through your benefits, it’s normal to feel overwhelmed. One question you might be asking yourself: Should I participate in the retirement plan my employer offers?

Something I see often with first-gen professionals is hesitation around joining the plan, and sometimes that means leaving part of their compensation behind. Let’s walk through a few of the common concerns and why it might be worth considering.

Common Concerns

“What if I don’t stay long?”

The money you put in is yours. If you leave after a year or two, your contributions go with you. You can transfer them (called a rollover) into another retirement account, like your new employer’s plan or an IRA. As long as it’s moved to the right type of account (pre-tax to pre-tax, Roth to Roth), you usually avoid taxes or penalties.

“What if I’d rather enjoy my money now?”

As first-gens, enjoying today often feels like a reward for everything it took to reach this point. But if you do make it to retirement age, you’ll probably still want to enjoy life then, whether that’s vacations, dinners out, or family time , without having to stress about money.

“What if I need the money before retirement? I don’t want to tie my money into something I can’t access.”

This could be a scary feeling, especially if you’ve witnessed emergency after emergency growing up. Retirement accounts are meant for the future, but that doesn’t mean the money is locked away forever. There are ways to tap into it, like loans or hardship withdrawals, though they usually come with trade-offs. Think of those options as a back up to the backup plan (emergency fund and insurances) and should be the last account you resort to.

“What if things end badly and my company won’t give me my money?”

Your contributions aren’t the company’s property. They’re usually kept in an account under your name with a third-party provider (like Fidelity or Vanguard) and protected by federal law (ERISA). Whether you leave on your own terms, get laid off, or the company shuts down, your contributions remain yours.

Why Contributing Might Make Sense

• Part of Your Compensation: Some employers add to your plan through a match. For example, if you earn $100K and your employer matches 3%, that’s up to $3,000 they’ll put in when you also contribute 3%. Not contributing to the plan can mean leaving your money on the table.

• Vesting Schedule: Your contributions are yours from day one. Employer contributions may follow a vesting schedule, which means you gain ownership of that money over time. Some plans vest right away, others gradually, for example, 20% after year two, until you reach 100%. Even if you’re unsure how long you’ll stay, contributing now gives you the chance to benefit if you do remain longer than expected.

Why Starting Early Can Help

As first-gens, we invest heavily in our education and careers, but it’s just as important to invest in our future selves. Do you want your future-self to have the freedom to travel, grab that daily coffee, try new restaurants, or spend stress-free time with your loved ones? Setting aside even a small amount now can help create those options later.

Something I hear often from people nearing retirement is, “I wish I had started sooner.” The earlier you start, the more time your money has to grow, even in small amounts.

FAQs

Is my money safe if the company shuts down?

Your contributions are kept in a separate account under your name and protected by ERISA.

What is a vesting schedule?

It’s the timeline for when employer contributions become fully yours. Your contributions are generally considered vested right away.

Can I take my money if I leave?

Yes. You can usually roll it into a new employer’s plan or an IRA without penalties if it’s transferred correctly.

What if I need my money early?

There are options like loans or hardship withdrawals that allow early access, but should be the last option and is why having an emergency fund in place is crucial.

This material is intended for educational purposes only. The information and opinions expressed on any websites linked in this material are from unaffiliated third parties. While they are deemed trusted and reliable, we cannot guarantee their accuracy.