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I have two options provided by my company:

1) 401(k) plan in which the Company matches 50% of the first $3,000 contributed; or

2) MSRP (Management Savings Retirement Plan) in which the Company matches 50% of all contributions, up to 20% of my salary. The catch with this plan is that the Company's matches vest only 1/3 each year I am with the Company (i.e. establishing golden handcuffs). Also, if I leave the Company the MSRP funds are distributed either in a lump sum or over five years, whichever I choose.

I do not know which to invest in. Currently I have $10,000 to contribute. I invest $3,000 in the 401(k) and the rest in the MSRP. Is this wise????
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It sounds like the "conventional wisdom" on this board would agree with your plan. Take the free match in the 401(k) first.

One thing that came to mind on the MSRP--if your match there is very limited in choice [frequently, these are totally or heavily company stock], you may want to guard against having a very large percentage of your retirement savings in one vehicle. If that is tha case, you may want to go $3K 401(k), $2K Roth IRA, and $5K MSRP.

IMHO & YMMV.
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2) MSRP (Management Savings Retirement Plan)


This sounds interesting. I would jump at the chance at a program like this if my company offered it (even if it was all company stock, which I believe (in my case) is an excellent investment).

Wait, though, this is about your program. I would need more information than what you have provided to determine whether or not it's a good deal. I would ask the following:

- Is the MSRP just in company stock? If so evaluate the investment objectively. I differ with the conventional wisdom in this area. If your companies stock is a good investment, there is nothing wrong with taking a large position.
- It's not clear here whether you can invest in both or just one. If you can invest in both, then definitely fund the 401K at a minimum.
- Is the MSRP investment pretax dollars? What is the company pretax limit for both programs? There is a $10K pretax 401K limit. Can you exceed the IRS 401K limit with the MSRP program.
- When you leave the company, can you roll the MSRP over to an IRA? (you can do this with your 401K of course).

It's pretty hard to beat a matched, tax deferred investment. Even if you have to forfeit some of it, it is still better than nothing. Take advantage of the MSRP program if all the details make sense.

rustedSoul
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Greetings, Chargers, and welcome. You wrote:

<<I have two options provided by my company:

1) 401(k) plan in which the Company matches 50% of the first $3,000 contributed; or

2) MSRP (Management Savings Retirement Plan) in which the Company matches 50% of all contributions, up to 20% of my salary. The catch with this plan is that the Company's matches vest only 1/3 each year I am with the Company (i.e. establishing golden handcuffs). Also, if I leave the Company the MSRP funds are distributed either in a lump sum or over five years, whichever I choose.

I do not know which to invest in. Currently I have $10,000 to contribute. I invest $3,000 in the 401(k) and the rest in the MSRP. Is this wise????>>


It sounds like the MSRP is a deferred compensation plan. While it has a great match, defers income from taxes currently, and a reasonable vesting schedule, the one drawback will be the immediate taxation of any distributions when you leave the employ of your firm. Unlike 401k plan proceeds, those cannot be rolled to an IRA, so the best you can do is take it over a five-year period to lessen the tax burden in any one year. For that reason, you may want to use the 401k first up to that maximum match and then switch to the MSRP. There may be far fewer tax implications that way. You need to run the numbers to be sure.

Regards….Pixy
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The MSRP match is in cash, not stock.
I can invest in both (i.e. $10,000 in the 401(k) and up to 20% of my income in the MSRP.
The MSRP is tax deferred pre-tax dollars.
I cannot roll-over the MSRP into an IRA like the 401(k).

Does this change your analysis? Thanks for the response.
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