Thinking about Pausing Your 401(k)? Read This First
Thinking about pausing your 401(k) contributions? While it may seem like a quick way to free up cash, even a temporary pause may reduce compound growth, eliminate employer matching contributions, and make it harder to reach your retirement goals. Before making a change, here’s what you need to know.
Key Takeaways
- Pausing 401(k) contributions may reduce long-term retirement growth due to the loss of compound growth.
- Continuing to invest during market downturns can allow you to benefit from dollar-cost averaging.
- Employer matching contributions may be one of the most valuable benefits available to retirement savers.
- Social Security alone is unlikely to cover all retirement expenses for most households.
- Traditional 401(k) contributions may lower your taxable income while helping you save for retirement.
Should You Ever Stop Contributing to Your 401(k)?
For most investors, the answer is no. Even a temporary pause may reduce compound growth, eliminate employer matching contributions, and make it more difficult to reach long-term retirement goals.
People are under financial pressure right now.
Between rising costs, market uncertainty, and everyday expenses, it’s tempting to look at your 401(k) contribution and think: What if I just paused that for a while?
We understand.
But the decision to stop contributing to your 401(k) – even for a few months – may have consequences that follow you for decades.
How Does Stopping 401(k) Contributions Affect Compound Growth?
Stopping 401(k) contributions reduces the amount of money invested and the future growth that money could have generated. Over time, even a temporary pause may result in a smaller retirement account balance.
Your 401(k) doesn’t just grow from what you put in. It grows on its growth.
That’s compound return…and time is one of the key ingredients.
Here’s what the numbers look like. Let’s say you have $6,000 in your 401(k) and contribute $300 a month. By age 65, assuming an 8% average annual return, you’d have approximately $709,000.
Now lower that contribution to $100 a month. Same return. Same starting balance. By age 65, you’d have approximately $295,000.
That’s a $414,000 difference just from cutting $200 a month.
Stopping entirely may be even more damaging.
Why Does Dollar-Cost Averaging Matter during Market Downturns?
Dollar-cost averaging allows investors to buy more shares when prices are low and fewer shares when prices are high. Continuing to contribute during market downturns may improve long-term results because investments are purchased at lower prices.
When the market drops, most people want to run.
But a down market is actually one of the best times to keep contributing.
Here’s why: When stock prices fall, your regular contributions buy more shares at lower prices.
When the market recovers, and, historically it always has, those shares are worth more.
This is called dollar-cost averaging.
You’re buying more when prices are low and less when prices are high, automatically.
The data backs this up.
An investor who started putting $500 a month into the market in March 2000, right at the start of the dot-com crash, and kept going through the turmoil, would have had about $700,000 by March 2025.
The investor who stopped and waited had about $573,000. [1]
That’s a $127,000 difference just from staying the course.
Related Read: How to Stay Calm When Market Volatility Hits Your 401(k)
Why Is the 401(k) Employer Match Too Valuable to Ignore?
An employer match immediately increases the amount being invested for retirement and may provide one of the highest returns available to savers. Failing to contribute enough to receive the full match may mean leaving part of your compensation behind.
There is no investment that guarantees a 100% return.
Except one: Your employer match.
Many companies match 100% of contributions up to 6% of your salary.
If you earn $40,000 and contribute 6% – that’s $2,400 – your employer puts in another $2,400. [2]
When you stop contributing, that money disappears.
Your employer doesn’t hold it for you. It’s simply gone.
At a minimum, always try to contribute enough to capture your full employer match.
Every dollar below that threshold is a dollar you’re leaving on the table.
What Tax Benefits Do You Lose When You Stop Contributing to Your 401(k)?
Traditional 401(k) contributions reduce taxable income, which may lower the amount of taxes owed each year. Pausing contributions may increase current tax liability while reducing long-term retirement savings.
Every dollar you contribute to a traditional 401(k) reduces your taxable income right now.
Think of it this way. If you earn $60,000 and contribute $3,600 to your 401(k), you only pay income taxes on $56,400. Depending on your tax bracket, that could put hundreds of dollars back in your pocket this year.
When you stop contributing, you lose that break.
You pay more in taxes today and save less for tomorrow.
Why Social Security Cannot Replace Your 401(k)
For most retirees, Social Security provides only a portion of the income needed in retirement. Personal savings, including a 401(k), are often necessary to help cover the gap between Social Security benefits and actual living expenses.
A lot of people quietly assume Social Security will cover most of their retirement.
Chances are, it won’t.
The average Social Security benefit for a retired worker in 2026 is approximately $2,071 per month, or about $24,852 per year. [3]
Most retirees spend between $50,000 and $60,000 per year. [3]
Do the math. Social Security may cover less than half the bill for a typical household.
The rest has to come from somewhere.
For most people, that somewhere is their 401(k).
Every month you don’t contribute is a month that gap gets wider.
What Should You Do Instead of Pausing Your 401(k)?
If you’re considering pausing your 401(k) contributions, focus on preserving as much of your retirement savings strategy as possible. For most people, that means continuing to contribute enough to receive the full employer match, addressing other financial pressures first, and seeking professional guidance before making changes.
Keep Contributing Enough to Get the Full Employer Match
Even if you need to reduce contributions temporarily, try to contribute enough to receive your full employer match. Employer matching contributions are part of your compensation, and missing them may reduce long-term retirement savings.
Address High-Interest Debt Strategically
If debt is creating financial pressure, consider redirecting money above your employer match threshold toward paying down high-interest balances. This allows you to continue building retirement savings while improving your overall financial position.
Talk to a Financial Professional before Making Changes
A temporary pause may seem harmless, but the long-term impact isn’t always obvious. Speaking with a financial advisor may help you evaluate alternatives and understand how today’s decisions may affect future retirement income.
Your Future Self Is Counting on You
Pausing contributions today doesn’t just cost you the money you didn’t put in.
It often costs you the growth on that money.
- The employer match you didn’t capture.
- The tax break you didn’t take.
- The shares you didn’t buy when prices were low.
Those losses compound just like gains do – in reverse.
If you’re feeling uncertain about your 401(k) strategy or want to make sure your contributions are working as hard as possible for you, we’re here to help.
Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.
Sources
[1] U.S. News & World Report. It Might Be Tempting to Put 401(k) Contributions on Hold, But Sticking With It Is a Better Strategy. June 12, 2025. https://www.usnews.com/news/business/articles/2025-06-12/it-might-be-tempting-to-put-401k-contributions-on-hold-but-sticking-with-it-is-a-better-strategy
[2] Empower. 2024 Money Plans & Goals Research. 2025
https://www.empower.com/the-currency/money/2024-money-plans-goals-research
[1] Social Security Administration. What is the average monthly benefit for a retired worker? SSA.gov.
https://www.ssa.gov/faqs/en/questions/KA-01903.html
