I recently spoke to someone regarding 401k plans. This is her field of work. She said that many companies have rules for withdrawing money. If you are currently working for a company and you have a 401k through your employer, then your employer actually makes the rules regarding withdrawals. In many cases (perhaps most), you are not allowed to simply withdraw money.
She said that the employers do this because they don't want you dipping into retirement savings. This rationale tells me one thing: the nanny state is everywhere, not just in government. These companies that don't allow regular withdrawals will only allow you to take "hardship withdrawals". You have to have a good reason according to the company's policy. For example, you may have to show that your house is being foreclosed on or that you have unusually high medical bills.
You actually have to submit an application and provide documentation for your hardship. If you are allowed to withdraw money, then you will still owe a 10% penalty (tax) to the government, along with any income taxes.
This is supposed to be your money in your account. Obviously that is not the case, especially when you are working for an employer that has these rules.
This makes me rethink my 401k strategy. I have been an advocate of contributing, but only up to the employer match. I don't think it makes sense to contribute any more than this, especially when you are locking up your money. Any additional money would be better put into a Roth IRA (where you can at least withdraw your principle), a brokerage account, gold, silver, real estate, or any number of things.
Now I wonder if people should contribute at all, depending on your employer's rules. I always thought that if the government were to try some kind of an additional tax or confiscation on retirement plans that there might be enough warning to withdraw some of your money. Apparently, many people would not be able to withdraw any money if they wanted to, at least for those under the age of 59 and a half.
I think your decision should depend on your situation. If you already have a lot of money in a 401k and you don't have a lot of liquid assets, you might consider cutting back your contribution, even if it means missing out on an employer match. If you have a lot in the way of liquid assets and little in retirement accounts, then perhaps contributing to your 401k plan and getting a match would be beneficial.
It is not only a good idea to diversify your investments, it is a good idea to diversify where and how you hold them.