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TchrP wrote:
<<... (unless you're from Beardstown...) ...getting an employer's match is not an investment return...>>

TMF Pixy replied:
<<No, no, no, no! ...It's a return on your money for that investment.>>

DrBear added:
<<Everybody is right! ...it depends on WHAT you are trying to analyze. If you are trying to determine whether you should fund your 401(k) or some other retirement vehicle (IRA, etc.) then include your employer's match money, because that is part of your total return.... if you are simply trying to determine the return of the funds you're putting your 401(k) money into, then it doesn't matter whether or not you include the employer funds...>>

What is this, the Simpson jury? OK then, juror #4 side with TchrP (and I wish I had been the first to add the clever Beardstown analogy). As Dr. Bear points out, if you are comparing the 401k with an outside investment, then including the match becomes very important.

Of course, it should also be noted that this can only be done with 20/20 hindsight. You can't know until after the event what the outcome will be and you can't reverse time to change a decision. For example, a 401k with bad investment options and an employer's match may fall short of some brilliant stock picking done through an IRA. However, the *sure, safe, sane* bet is to always take the 401k match first.

But within a 401k comparison, never add the match to your return. When you want to know how you're doing, you must find a benchmark for comparison. This benchmark (usually a market index) won't have an employer's match added in, so why should your numbers?

It wouldn't be comforting to me to know that the only reason I'm even with the market is because of my matching funds. I want to know what the underlying investment is actually doing, not how the final, heavily massaged numbers make it appear to be doing. Although the matching money is yours in the end and the alternative investments may be less than pleasing (or non-existant), I still want to crunch my numbers to expose the base return. Companies that try juggling numbers to "show" more profit get their heads handed to them. The verdict is final.
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