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Subject:  Re: 401(k) OR MSRP Date:  1/26/1999  9:07 AM
Author:  TMFPixy Number:  8107 of 103868

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.


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