No. of Recommendations: 2
I never know what my employer's match will be until after the year is over. Once it was a 50% match.(For real!) There hasn't been any match at all in a while, though.

Sounds like your employer is doing 'elective' matching, where they don't commit ahead of time.

Also, I know that at least 2 of my co-workers consistently get money back at the end of the year because they have over-contributed. The reason for this is apparently not enough people participate in our company's plan. (Maybe because of the flaky matching pattern ya think?)

It is partially due to the match, or lack thereof. Generally, getting money back 'because of overcontributions' is because the employee is a 'highly compensated employee' and as such, their contribution is limited based on what the non-highly compensated employees actually contribute. (There are lots of rules about calculating this, but you get the general idea....) This limitation can be overcome if the employer does a 'safe harbor' match for all employees. But since your employer is apparently doing 'elective' matching rather than committing to a match percent/amount, highly compensated employees at your company will get hit with this.

A highly compensated employee is currently anyone who makes more than $110k (adjusts in $5k steps for inflation), owns 5% or more of the business, or is one of the top 20% of earners in the company. This Wikipedia article has some more details: http://en.wikipedia.org/wiki/401(k)

So what do we do with our extra money? Do we divvy it up between our 401ks or do we put it in our taxable account? I just don't know if the tax advantage of the 401k will offset the semi-crappy funds/higher expense ratio/flakiness.

Well, at $130k in income, I presume you are in the 25% tax bracket. So, contributing $100 to your 401(k) would be the equivalent to contributing $75 to a taxable account and paying $25 in taxes. So, you are able to invest more in the 401(k) with the same amount of income. However, IF (and that's a big IF) the tax laws when you retire are similar to the tax laws now, capital gains rates are lower than ordinary income rates, so you wouldn't have to pay as much in taxes then. Since my crystal ball is really cloudy on this point, you have to make your own judgement as to how you would be affected.

On the other hand, because trying to predict what tax laws are going to be 30 years in the future is a crapshoot (at best), I subscribe to the theory that it's best to have investments in a variety of different accounts: Taxable, Tax-Free (Roth) and Tax-Deferred (401(k)/Traditional IRA). That way, you can structure your income in retirement to minimize your taxes. It sounds like you have Tax-Free and Tax-Deferred accounts, but don't have Taxable accounts? If so, then starting a taxable account would probably be a good idea.

AJ
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