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7:42 pm
May 2, 2013
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Edward Antrobus
| | Fort Collins, CO | |
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My company wasn't matching 401(k) contributions when I was hired 2 years ago, so I elected to skip it in favor of contributing to my existing IRA. Now, they are offering a match. The catch is that you have to contribute at least 6% and they will match 3.5% Anything less than 6% will not receive the match.
Currently, I'm contributing about 2%. So 6% is a pretty big jump. Compounding this, I'm expecting significantly less income this year from last. I'm figuring around 20% less.
So leaving aside any judgments over whether or not I've been or would be saving enough for retirement (please, let's skip that debate, I'm not going to respond to that discussion at this time), do you think it is worth TRIPLING my retirement contributions to be able to get a company match?
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I'm looking for editors, beta-readers, and some demographic research for my upcoming novel, Once Upon a Saturn Moon. If you like reading soft sci-fi thrillers, maybe with a touch of romance thrown in, you can find more information at http://seampublishing.com/once…..aturn-moon
If You Can Read, You Can Cook – http://www.ifyoucanread.com | Think you can't cook? If you can read this sentence, then you can.
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9:23 pm
May 2, 2013
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PK @ DQYDJ
| | The Intersection of Politics, Economics and Personal Finance. | |
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If 6% is the minimum they'll give you a match, is there a maximum? I'd say yes, do it up to the full match – you're talking 58 1/3% returns on your money instantly.
If you have an issue, remember that money isn't gone 'forever'. Although it should be one of your last options, you've got 401(k) loans. Additionally, if theoretical troubles include a job loss you can rollover the 401(k) to an IRA and do a 72(t) to get it out tax free.
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9:49 pm
May 2, 2013
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Edward Antrobus
| | Fort Collins, CO | |
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PK @ DQYDJ said:
If 6% is the minimum they'll give you a match, is there a maximum? I'd say yes, do it up to the full match – you're talking 58 1/3% returns on your money instantly.
I'm theoretically allowed to contribute up to 50%, (and still not hit the IRS limit!), but it is a flat 3.5% match.
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I'm looking for editors, beta-readers, and some demographic research for my upcoming novel, Once Upon a Saturn Moon. If you like reading soft sci-fi thrillers, maybe with a touch of romance thrown in, you can find more information at http://seampublishing.com/once…..aturn-moon
If You Can Read, You Can Cook – http://www.ifyoucanread.com | Think you can't cook? If you can read this sentence, then you can.
SEAM Publishing – http://www.seampublishing.com | eBook formatting and publishing service
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5:35 am
May 3, 2013
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saverocity
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If I understand you correctly, you are putting X now (which yes, it isn't enough but I hear you) You should look at the amount of the bonus from matching if you contribute extra. You are already OK to put in 2%, so for a 4% increase you get 3.5% bonus money – almost doubling the new money that is going in the pot
EG you are currently putting in say $800 per year – if you put in $1600 additionally then the company will kick in $1400. Almost a 1:1 match on anything you do above now.
Furthermore, whilst you don't want to talk about it, you aren't putting enough in right now, and the compound effect of putting (in the example above $3800 instead of $800) per year into your retirement account is massive, so it is clearly a great idea from that perspective.
On the down side is that right now you have less money to play with, which is related to your own circumstances beyond the details of that post, so can you afford to take the cash flow hit. This is tempered by the fact that you will be reducing your AGI by $1600, meaning that you pay less tax by that amount.
If you were earning above $36250 from this job and filing single, you would be paying 25% on anything above that number, so what you could do is pull you AGI down below 25%, and instead of paying $400 tax not pay it at all on the $1600.
In that situation (yours might be different) you would be getting a 'refund' of $400 on the $1600 you kick in. Meaning that for putting $1200 into the 401(k) you would be getting $3000 added to the account every year. Which to me is a no brainer.
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5:51 am
May 3, 2013
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Greg @ ThriftGenuity
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If you have any way to swing it, I vote yes. I never want to leave free money on the table.
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6:45 am
May 3, 2013
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jaicatalano
| | New York | |
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Don't we all love making a buck and saving a buck? I used to walk back and forth 2 miles everyday to go to work to save $4.50 daily. In doing so I found other excuses (not financial) to do so.
I guarantee you will find another reason it's good to do it once you are in it.
Listen if you can swing it try it out for a while. I am sure you will love the extra savings even if you don't want to talk retirement.
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7:30 am
May 3, 2013
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krantcents
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I contribute the max to my 403B and I cannot get a match working for a school district. Why leave money on the table?
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8:04 am
May 3, 2013
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Eric – PersonalProfitability.com
| | Portland, OR | |
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Do whatever you have to do to get the company match. If you don't, it is like burning money. You get to keep it all when you leave. It is not an expense, it is an investment.
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7:10 pm
May 3, 2013
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Edward Antrobus
| | Fort Collins, CO | |
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saverocity said:
On the down side is that right now you have less money to play with, which is related to your own circumstances beyond the details of that post, so can you afford to take the cash flow hit. This is tempered by the fact that you will be reducing your AGI by $1600, meaning that you pay less tax by that amount.
Based on all of the withholding issues I have with my employer, that argument actually makes me a little more leery of the idea. They regularly under-withhold. I'm now pushed it up 0 exemptions at the higher single rate + $25 per paycheck. That SHOULD put my withholdings about even with my taxes this year. I'm a little afraid to do anything that would induce them to withhold even less, even if it is because less needs to be withheld.
If you were earning above $36250 from this job and filing single, you would be paying 25% on anything above that number, so what you could do is pull you AGI down below 25%, and instead of paying $400 tax not pay it at all on the $1600.
That's about 50% more than I made last year. Being able to deduct my entire income wouldn't change our tax bracket. I appreciate the information, but I'm so far from the upper or lower limits of my current bracket, the discussion of lowering my bracket isn't an issue for me at this time.
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I'm looking for editors, beta-readers, and some demographic research for my upcoming novel, Once Upon a Saturn Moon. If you like reading soft sci-fi thrillers, maybe with a touch of romance thrown in, you can find more information at http://seampublishing.com/once…..aturn-moon
If You Can Read, You Can Cook – http://www.ifyoucanread.com | Think you can't cook? If you can read this sentence, then you can.
SEAM Publishing – http://www.seampublishing.com | eBook formatting and publishing service
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9:20 am
May 4, 2013
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saverocity
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Even if it doesn't reduce your tax bracket, your savings will be at 15% and still tangible. You would get $240 more money over a year from the reduced taxable AGI.
If you are fearing a hit from the tax man from underwithholding then simply take matters into your own hands and assign X per month into a savings account that pays a little interest, such as from Ally Bank. You can also make your own payments along the way to the IRS if you are certain that you will be owing money, but I think as long as you are making some sort of payment from your employer you should be fine.
The worry shouldn't be 'do I get a big tax bill due to underpayment' it should be 'do I get a penalty' and I think if you are contributing it should be OK on that front – but feel free to call them up and ask about the need to make an estimated tax payment due to your employers level of contribution seeming low to you – they will help you out.
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12:33 pm
May 4, 2013
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First Million is the Hardest
| | Buffalo, NY | |
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I say definitely give it a shot for a while and see if you can swing it financially. The match will be a significant portion of your balance so you dont really want to be passing it up.
It's basically the same conversation I had with my girlfriend earlier this year. She wanted to max out her 401k but was real tentative about how it would affect her day to day finances. I told her just do it, and give it a shot for a while. You'll likely find that you easily adapt to the change. If you don't, and really feel like you need the extra cash in your hands now, you can always knock the contribution back down at a later date.
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6:28 pm
May 4, 2013
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michael @ financial ramblings
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Post edited 6:33 pm – May 4, 2013 by michael @ financial ramblings
I'll go ahead and say what everyone else is thinking: You really need to do everything in your power to make this happen. Not only are we talking about a significant chunk of free money but, let's be honest… A 2% savings rate just isn't going to cut it. I know you asked for us to avoid that subject, but there it is. Imho, that really is (by far) the overriding concern in this discussion.
As for the original question, I think you already know the answer to that. Yes, it's most definitely worth tripling your contributions because that extra 4% is going to get you a free 3.5%. You'd be getting a nearly 1:1 match on your extra contributions. That's huge.
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5:22 pm
May 14, 2013
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Funancials
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Absolutely. I'm confident you'll find a way to make it work.
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5:30 pm
June 10, 2013
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moneyandpotatoes(thepotatohead)
| | PA | |
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Id do everything you can to at least get the match, even if that means switch contributions from your IRA to the 401k. Doubling your money basically by getting the match, can't pass that up.
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7:58 am
June 12, 2013
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Barbara Friedberg
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Do not leave free money on the table. Do whatever you can to get employer match. Get the free money even if that means skipping funding the IRA until you can fund both.
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9:20 am
June 12, 2013
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Edward Antrobus
| | Fort Collins, CO | |
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| posts 1008 |
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Funding both was never a plan or even an option. The combined contribution limits are 80% of what I made last year.
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I'm looking for editors, beta-readers, and some demographic research for my upcoming novel, Once Upon a Saturn Moon. If you like reading soft sci-fi thrillers, maybe with a touch of romance thrown in, you can find more information at http://seampublishing.com/once…..aturn-moon
If You Can Read, You Can Cook – http://www.ifyoucanread.com | Think you can't cook? If you can read this sentence, then you can.
SEAM Publishing – http://www.seampublishing.com | eBook formatting and publishing service
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11:47 am
June 20, 2013
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bobrichards
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| Member | posts 10 |
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PK @ DQYDJ said:
If 6% is the minimum they'll give you a match, is there a maximum? I'd say yes, do it up to the full match – you're talking 58 1/3% returns on your money instantly.
If you have an issue, remember that money isn't gone 'forever'. Although it should be one of your last options, you've got 401(k) loans. Additionally, if theoretical troubles include a job loss you can rollover the 401(k) to an IRA and do a 72(t) to get it out tax free.
anytime anyone offers you free money TAKE IT! #1 Rule of Rich People.
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