UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: 401k matching Date: 10/14/2011 3:36 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Something to watch out for:

Many companies do their match on each paycheck. If later in the year your contribution stops, so does their match. Even if you hit the IRS max contribution before the end of year.
5% of each paycheck is not the same as 5% of your total annual paychecks, if some have a 401k contribution and some don't.

My employer and supposedly many companies, do a "true-up" in January if this happens to you, and deposit the difference. I never trusted them to do this and to get it right, although I knew others who checked and said that they did it right.

Your case is a bit different, I think, and there are some missing details.
Is it a 1-for-1 match on the first 5% of your 401k deposit on each paycheck, but with a maximum annual cap of $3000 match? (Probably)
That would be: Your paycheck is $6000 and you contribute $300 (5%) and they contribute $300 (5%). They'd hit their cap in 10 months.

The question is does it make sense to have 5% deducted from my pay each month until I hit the max $3000 for the year and then drop my deduction for the rest of the year so that my overall outlay is the same for the year. In effect I would be front loading the contributions and receipt of the match into the first half of each year. vs. spreading it out over the whole year.

What you want to do is get as much company money as you can, as early as you can. That's free money. Free is good.

The generally accepted rule-of-thumb for retirement contrihutions is:
1st: The 401k until you've captured every bit of the company match.
2nd: A regular IRA -- IF and only if it is tax-deductable (it probably isn't).
3rd: A Roth IRA.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Berkshire Hathaway

The American Energy Revolution
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement