When NOT to contribute to a matching 401k plan

When working for an employer, you only want to contribute up to the percentage where the employer matches your contributions. Anything over that amount should be contributed to your Roth IRA or personal brokerage account because: 1) you have more investment selections in your Roth or personal account versus your employer's retirement account. 2) withdrawing funds from your employer's retirement account has more red tape when compared to other accounts. Account size and investment selections does matter. Access to your favorite Vanguard index fund with the lowest annual expenses is usually not accessible through employer retirement plans unless they are willing to pay their high maintenance fees.

In regards to the employer's matching contribution, avoid contributing to the plan at all, if the employer's match is in company stock. The whole point of contributing to a 401k plan is to make money. Anyone who says otherwise, is selling you a Ponzi scheme. Recent corporate examples such as Enron, Worldcom, Tyco, Countrywide Credit, and Bank of America are reasons why not all 401k plans are worthwhile.

However, if you like your company's stock, make sure you mentally set a price you will sell your shares since NO stock goes up forever. You should reset the selling price in your head at once every 3 months. You can always buy new shares later on if your company's stock resumes its uptrend, but DO NOT dollar cost average down. If the stock price is going down over several months, that is a signal that something is wrong with the company, and there is no reason to invest your hard earned money in a downtrending stock.