ChatGPT Says Skipping 401(k) Match To Afford Car Payments Will Cost So Much
Car payments are expensive enough. Don't make a costly error and sacrifice interest far, far in excess of any APR and dealer fees. Unfortunately, that's exactly what many people are doing when they choose the car payment over a 401(k) match.
It seems like a reasonable trade-off in the moment — pull back on retirement contributions to free up cash for a car payment. According to ChatGPT, it's one of the most expensive financial decisions most people never fully account for.
I asked the AI to run the real numbers and the long-term cost is significantly larger than the monthly payment you're trying to cover.
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Don’t Delay: Start Growing Your Net Worth With Smarter Tracking
The Setup
ChatGPT used a straightforward example. An employee earning $70,000 with a 5% employer match, who stops contributing to capture that match, gives up $3,500 of their own money and $3,500 in employer contributions — $7,000 total per year that stops going to work for their future.
That's the visible cost. What follows is where it gets painful.
What $7,000 a Year Actually Becomes
At a 7% average annual return, that $7,000 in missed yearly contributions compounds into roughly $97,000 over 10 years, $287,000 over 20 and $661,000 over 30. The car payment you needed help affording is quietly trading away a six-figure — or in some cases seven-figure — retirement balance.
Two Things Happening Simultaneously
While the 401(k) contributions stop growing, the car is doing the opposite. New vehicles lose roughly 20% of their value in the first year and around 50% to 60% over five years. Insurance, maintenance, loan interest and registration keep costing money throughout. So the same decision that pauses compounding growth also adds depreciating costs on the other side of the ledger. The financial gap between where you'd be with the match and where you end up without it widens from both directions at once.
ChatGPT made one point worth sitting with: the employer match isn't a retirement perk. It's part of your total compensation. Choosing not to capture it is functionally equivalent to accepting a pay cut — except in this case, the pay cut compounds against you for decades.
Why Timing Makes This Worse Than It Looks
Skipping contributions in your 20s or early 30s does disproportionately more damage than skipping the same amount later. Money invested early has the most time to compound. A dollar contributed at 25 has 40 years to grow before a typical retirement age. The same dollar contributed at 45 has 20. The years you pause matter as much as the dollar amount you pause, and frequently more.
When a Temporary Pause Could Be Justified
ChatGPT didn't treat every situation as identical. Pausing contributions for a short and clearly defined period can make sense when you're dealing with high-interest debt above 20%, navigating a genuine cash emergency or managing a job transition. The key word in all of those cases is temporary — and even then, the goal should be to restore contributions to at least the match threshold as quickly as possible. Delaying contributions to the end of the year isn't ideal, but far preferable to missing your opportunity to make them at all.
The Better Question To Ask
Rather than asking whether you can afford the car payment, ChatGPT reframed the decision entirely. The real question is whether you're willing to trade $300,000 to $600,000 in future wealth for a particular vehicle. Framed that way, the decision looks different for most people.
Cheaper used cars, extended timelines before buying, keeping contributions intact and finding other places to cut are all alternatives that don't require walking away from free money. The match will always be the highest guaranteed return available: a 100% immediate return on every dollar contributed, before the investment even begins to grow. Nothing else in a typical personal finance toolkit competes with that.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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