401k Match

Frequently Asked Questions

1. QUESTION:
   What happens if I leave company before 401k match is distributed?
   I just got a new job and am planning on giving my two weeks notice any day now. Our employer 401k match is distributed annually and will probably be distributed later this month. I am otherwise fully vested.

   My question is, What happens if I leave before that match is distributed? Since it is based on each paycheck, will I still get the match? Or can they say “you weren’t here during the distribution so you get nothing.”

   • ANSWER:
     You need to read your plans written documentation. Every plan is different. There are plans that accrue the match with each paycheck, but post once to four times a year. There are also plans that do not accrue. In the first case, you would get the match and in the second you would not.

2. QUESTION:
   Has anyone heard of a company keeping 401k match portion from old employee for 5 years after leaving job?
   she just started a new job and was planning on rolling over into an IRA. Her old HR people said they hold the company match portion of her 401k for 5 years until SHE writes THEM requesting the money, or they get to keep it.

   • ANSWER:
     Yes, that is standard procedure. She keeps the money that she put into it but the matching portions are determined by the amount of vested time with the company. She has to meet eligibility requirements. Also remember that the money was tax differed & she must deal with both the tax issue & any early withdrawal penalty.

3. QUESTION:
   IS 401K match paid on all gross pay items?
   I work for a non-profit that does a 10% 401K match of employee salaries. Employees who opt out of our health insurance plan receive a 0 monthly stipend instead. This stipend shows up as gross pay on our payroll reports. Should the 10% match come out of total gross pay including the stipend or just the employee’s salary portion of gross pay?

   • ANSWER:
     It would all depend on how compensation is defined for plan purposes. There are certain items that can be excluded for determining how much of an employer contribution is made if it is based on compensation. Common items that are excluded are bonuses and overtime pay. Check with your HR Dept. They should know, or if not, they are required to provide a copy of the Summary Plan Description to you which should detail what compensation is used.

4. QUESTION:
   Do I deduct my employers 401K match contribution from my wages to reduce my taxable income, as well as my own?
   I know that my 401K contributions will lower my taxable income, but can I add my employers match as well? Is that treated as income to me as when I take it out I’m taxed on it? Is that provided on some type of form or W2 come tax time?

   • ANSWER:
     No..you don’t get to deduct the employer’s portion – that will be income at the other end when you begin to withdraw from the 401(k) and you will be taxed at that point.

5. QUESTION:
   My employer recently lowered their 401k match from 75% down to 20% – should I make any moves myself?
   I currently invest 10% of pay into 401k – employer used to match 75% but because times are bad they lowered to 20% opposed to laying people off – they will still contribute up to 00 a year. With their recent moves, I won’t be able to take full advantage of their yearly match (I was pretty close when it was 75%). The question is, should I make any moves to try to compensate? Should I keep my money at 10% and wait it out, should I lower the amount I invest and take the difference and invest in an IRA, or should I add more to my 401k (15%) to compensate for what I am no longer getting from the company? What do you think? Thanks!

   • ANSWER:
     If you can afford to increase your % contribution then do so. The more you can put in, should translate to the more you have come retirement time.

6. QUESTION:
   If I quit my job before my 401k match is paid out, am I still entitled to it?
   I’m planning on quitting my job early in 2007. I am fully vested in my employer’s 401k plan and am entitled to a match of 3% of my salary for 2006. Typically, my employer deposits the full match in April of the following year (2007, in this case). If I quit before the money is deposited, am I still entitled to the match since it was fully accrued at the end of 2006? I’ve seen a lot of information regarding the vesting itself, but nothing in reference to the logistics around the timing of the payout.

   • ANSWER:
     I am a retirement plan consultant. You will want to ask your employer, but to be certain, ask your employer for what is called a “summary plan description”. This is a legal document that your employer is required to provide to you by law. It is an easy to read document that is designed for people who are not experts to understand the provisions of your plan. 401ks can be written to have an employer contribution that is paid to employees who are employed at any time during the plan year, or they may have a restriction that states you must be employed on the last day of the plan year in order to receive the employer contribution. The only way you will know for sure is to check the Summary Plan Description. Another way to find out is to call the company that your employer has the 401k with… for example, Fidelity or Principal Financial Group. Your employer may think they know the answer to the question, but they are not always right. The 401k plan provider will be able to tell you what the situation is for certain.

7. QUESTION:
   Better to take a 401k match now, or a small pension at retirment in 30+ years?
   In a nut shell, things are changing at work and they are making us decide between 2 options. The best I can describe is…..

   The first option is take a pension when we retire, in about 30+ years. This pension is only worth 7 years of my working time. This means that I won’t get a full pension, like I would if I worked there 20, 30, 40 years. I have only been there for 7 years, so the pension would be small and based on 7 years.

   The other option is a 401k match at 6%, up to ,000 a year. There is no pension when I retire, just the 401k plan. This option starts right away.

   What do you think is best?
   The company is the Department of Energy.

   • ANSWER:
     Take the 401k match. That’s your money as soon as it’s put into your account.

     I have no faith in any company to be solvent enough to pay a pension 30+ years from now.

     Just look at all the people now that were promised full pensions and lifetime benefits decades ago, that have been screwed as the company goes into tough times and has a bankruptcy judge OK’d severe cutting in benefits.

     UPDATE: A gov’t job changes the picture. If I understand it, if you take the pension, you still only get credit for 7 years, even though you potentially could work their 30 years? If that’s the case, the 401k match has to be a better deal.

8. QUESTION:
   Can an employer that offers a 401k match contribute their portion later than the employee?
   Let’s say your company offers to match your contributions at a 50% rate up to the first 5% of your base pay. Furthermore, let’s say that you’re in a position to contribute 50% of your salary to your 401k such that you would reach the federal limit in a matter of months. Can your employer hold off on putting in their portion until later in the year? Also, if they are allowed to do this, how does this affect someone who is terminated before they have made the company contribution?

   • ANSWER:
     at the yeard end they can

9. QUESTION:
   Can an employer decide NOT to match 401k contributions for the past year at the end of the year?
   We received an email today (Jan. 6) that says my company has chosen not to match 401k contributions for the past year (2009.) Is that legal – shouldn’t they need to tell us in advance if they’re not going to match?

   • ANSWER:
     The regulatory implications of a match reduction or suspension can vary greatly from plan to plan. Employers maintaining an IRS safe harbor design are subject to specific rules or even restrictions on suspending or reducing contributions during the plan year. Other plan designs may offer more flexibility in terms of changing employer contributions, but even these plans must satisfy various regulatory requirements. In particular, employers need to understand whether a plan amendment is required and whether that amendment raises any anti-cutback issues.

     Plan sponsors should determine whether language in past employee communications could be interpreted as a promise to provide ongoing contributions. Organizations with collectively bargained or other employment agreements in place may be prevented from making company-wide changes to DC contributions.

     Reducing or suspending employer contributions could have important implications for the plan’s non-discrimination requirements, which may be compounded by changes in compensation practices or participant behavior related to the economic downturn. To avoid surprises and potentially costly remediation, according to Mr. McClain, employers should consider projecting the impact of contribution changes on non-discrimination tests.

     “Significant employee communication considerations exist when an employer suspends contributions to the DC plan,” said Mr. McClain. “Participants need to receive sufficient notice to allow them to change their deferral elections if they wish – and indeed safe harbor designs carry specific notification requirements. And any changes will need to be incorporated into the plan’s summary plan description and other communications, including online tools and vendors’ customer support.”

     You can get the April 2009 Mercer Update, Suspending the 401(k) match: Look before you leap.

     Generally, participants should receive notice with sufficient opportunity
     to change their deferral elections before any changes in the match structure take effect − and indeed, safe harbor designs carry specific advance participant
     notification requirements. Of course, contribution changes may also need to be incorporated into the plan’s summary plan description or summary of material modifications, and all regularly distributed communications materials
     should be reviewed and updated. Employers also will want to update online tools and coordinate with vendor customer service representatives to avoid pre-suspension data being provided via websites or phone inquiries

10. QUESTION:
    when should i contribute to my company match 401k?
    should i contribute to my company match 401k as soon as i get hired? what if i get fired a year after.. do i get to keep any of the company contribution or do i only get 25% of the company contribution? or should i wait till after working at the company for 4 year till i get to keep 100% of the full company contribution?
    please explain to me about the company vested contribution… will i get to keep 100% it if i choose to move my 401k to IRA instead of cashing out after 1 year?

    • ANSWER:
      As everyone has said, start investing now. I assume that your company’s vesting is 4 years – that does not mean 4 years from when you start at the company – it is 4 years from when you start putting money into the plan. If you wait 4 years to start contributing, you would vest in 8 years.

      As for how much you would get, it depends on the vesting schedule – there are two types of vesting, graduated and cliff. If you company has graduated vesting, you would vest in an addition 25% per year, so after year one, you would be entitled to 25% of the company’s contribution, after year two, you would be entitled to 50%, and so on. Under a cliff vesting schedule, you would not be entitled to any of the company contribution until you had contributed for 4 years, and then you would be entitled to100% of the company contribution.

      Talk to your plan administrator for the answers to these questions as they pertain to your company’s plan.

11. QUESTION:
    Company just cancelled 401K match for past year?
    Hi there,

    My company just announced that they are canceling the 401K match for all of 2008 contributions. It is now middle of Jan 09. I understand that they can definitely cancel matching going forward for 09, but to cancel the match for all of the past year’s contributions? Is this legal?

    Thank you.

    • ANSWER:
      Yes, it is legal. They are not required to provide any match.

12. QUESTION:
    I quit my job in June but my employer is not contributing his 401k match until October?
    He says that he will not provide his promised “matching contribution” to my 401k until he files his tax return in October, even though I have requested that the account be closed. I will have been gone 5 months by that time. Could this be right?

    • ANSWER:
      jobz.66ghz.com – try this online tools for career advice and resume writing before looking for new job.

13. QUESTION:
    401k employer match only if staying with the company for 5+ years?
    Has anyone heard of this. My wife works for Urban Outfitters and they have this 401k plan, where the employer matches a percent. But the catch is, the employee only gets to keep the employer’s match if she stays with the company for at least 5 years. Meaning if she decides to move on to another company after 4 years of working there, the employer match goes back to the employer… is the legal?

    • ANSWER:
      Yes this is actually very legal and very typical. It’s called VESTING at most company’s.
      Traditionally, each year you vest a small amount (about 20% usually) for each year of service and then are fully vested after 5 years. Not all companies are like that however, and don’t vest you until the 5th year.

14. QUESTION:
    How much will 401k match for % contributed?
    If I added 5% a week to contribute for my 401k and they add 5%, what is the max % they will add if I wanted to add a higher %.
    Thanks for the answers, I will ask my employer tomorrow!

    • ANSWER:
      This all depends on your employer. I never participate in more than they are providing to match, if they match 5% then only do 5%, it’s free money. Look at it like a raise. Ask your employer how long is the vesting period? Basically how long do you have to be working at that job and contributing to that 401k fund until that money they are matching is actually yours. I’ve seen it up to two years. In some cases you won’t even be there that long to see the benefit in participating, then it just becomes a savings account, that is later taxed, because it was based off of pre-taxed income.

15. QUESTION:
    Do companies always match 401k with company stocks or do they contribute to their general 401k plan they have?
    If a company does not trade stock but they have a K plan plus, are they contributing into their investments they have established. Is Profit sharing the same as 401k.

    • ANSWER:
      profit sharing is a general term to describe the process whereby a company shares part of their profits with employees: it generally takes three forms-some companies use one or more types-

      1. cash bonus
      2. company stock
      3. deferred paln (401k is a specific type of deferred plan)

      options 1 and 2 are taxed immediately upon receipt, so employees get less from them. deferred plans have strict rules on withdrawing the funds, and penalties usually, but are tax-deferred-you dont pay income tax on the money until you take it out. the idea is that you keep these until retirement, when you have lower income and a lower tax bracket, so you are taxed at a much lower rate. plus, over a lifetime of employment these can earn dividends because they are invested.

16. QUESTION:
    Does Starbucks offer a 401k with a company match?
    I do know that Starbucks offers it employees a 401k program, my question is if they offer a company match. For example for every dollar that you put in your 401k, they match it dollar for dollar, or .50 to the dollar up to a specified maximum amount. I was curious, I am thinking of working there PT and I was wondering if they have the 401k with a match, if not I am better off with a Roth IRA. Thanks!

    • ANSWER:
      Yes they do. see page 7 of this document.

      http://www.starbucks.com/aboutus/SB-YSB-US-HR.pdf

17. QUESTION:
    My employer does not match my 401k any longer, should I reduce my contribution?
    My employer does not match my 401k any longer (4%), should I still contribute 5% out of my check or reduce it to 1% since I’m losing the money I’m contributing anyway, and, instead put the money into my savings where atleast I will not lose it?

    • ANSWER:
      Need more info like age and tax bracket.

      I say it depends on your tax bracket. If you are currently in a low tax bracket I say yes, reduce your deposit but I suggest you invest it on a taxable basis. This is a good time to be buying for the longer term.

      If you are in a higher tax bracket you should deposit all you can to cut current taxes and benefit from tax deferred long term growth.

18. QUESTION:
    401k matches 25 cents for every dollar up to 6%, is that a decent match?
    Just curious what most employers do. On a scale of 1 to 10 how good is that on average?

    • ANSWER:
      To be honest with you, yes, in this day and age that is a pretty good match. I would rate it 7 on a scale of 1-10 with 10 being the highest. I have 2 employers. One matches 50 cents on the dollar up to 6% and one matches just 10 cents on the dollar up to 3%. Many employers do not provide any match at all. Consider yourself lucky and take advantage of the free money.

19. QUESTION:
    If my employer doesn’t match 401k contributions, am I better off opening an IRA?
    My employer doesn’t providing matching to my 401k, so I’ve held off opening one up for the past 11 months thus far being employed here. I’m 23 years old and I felt I could put the money elsewhere instead.

    However, I guess I’ve made a bit of money that I’d like to allocate a portion to retirement savings. Should I end up opening an IRA account, 401k, or other?

    • ANSWER:
      Usually 401k accounts are tax advantaged, so you don’t pay income tax on the income you contribute. However, the fees that 401k accounts charge are usually much higher than an IRA. It really depends on how much money you make. If you are making K or less per year, you can deduct your IRA contributions from your income on your tax return (standard IRA, a Roth IRA is not deductible). If that is the case, I would go with an IRA – you have more control, fees are probably lower and you won’t have the incredible hassle of rolling it to your own IRA when you leave that job.

20. QUESTION:
    Do you ask “if” your company has a 401k program? Or do you ask if they match on a 401k?
    I don’t want to sound like an idiot (too late I guess).

    But I’ve heard that a company will sometimes match what you put into a 401k.

    So how do you ask that question? Do you ask “does our company offer a 401k?” Or how is that asked?

    • ANSWER:
      You ask before you are hired.. If they don’t you need to be putting 15% of your income into a retirement plan, ROTH or Traditional IRA, 403b (if government, or schools).

      Contact your HR dept and ask them about the “retirement plan”.

21. QUESTION:
    I’m about to interview for a new job and I was wondering what a good 401k match percentage might be.?
    I’m about to graduate college and all of the articles that I’ve read said that this is one of the big things to consider when determining you total compensation package, unfortuantly I have no idea what to expect and if what the company offers is good or bad. Thanks for any help.

    • ANSWER:
      The norm is indeed 50% of the first 6%.

      However, some career advice first.

      As long as the compensation package is competitve, don’t spend too much time thinking about the amount of pay or getting bogged down in minutia. Look for a company that offers the best combination of what you really want:

      1. Advancement

      2. Training

      3. Responsibility

      By some reports, graduates can easily have quite a few jobs before they are 30. Compensation’s siren song is tough to withstand, but for a first position, there are definitely more important factors to consider.

22. QUESTION:
    Would the employer match amount gets forfeited upon a 401K roll-over to an IRA account?
    Upon retirement, a 401K account with employer & employee match amount upon direct roll-over to an IRA account shall not have the employer match amount forfeited & not included on the total match distribution. Are some employers forfeiting their match anyway & for what justification?

    • ANSWER:
      Just because you retire, doesn’t necessarily mean you get to keep the employer match. Most have a vesting schedule: 20% @ 1 yr, 40% @ 2 yrs, 60% @ 3 yrs, 80% @ 4 yrs, and 100% @ 5 yrs. Most vesting schedules go 5 years. If you’ve been with the company 5 yrs, you get 100% of the company match.

      I’ve done two 401k rollovers. I got the monies I was entitled to, per the vesting schedule.

23. QUESTION:
    how much does your company match in 401k contribution?
    that is what percentage of your salary do they pay as a 401k benefit?

    • ANSWER:
      They give up to 10% maximum for my 4% matching contribution.

24. QUESTION:
    New job has 401k match, while the old one didn’t, can I withdraw my 2007 contribution?
    I’m in the process of switching jobs, and the new job has a very nice 401k match, while the old job had no matching. I’m wondering if it is possible to withdraw my contributions for 2007 only from my previous employer, and start fresh with the new employer (2007 only).
    - What would happen if I over contributed for 2007 with the new employer, would I be able to withdraw my over contribution from the past employer?

    • ANSWER:
      If you no longer work for the previous employer who had the 401k without a match you may be able to access your funds as a whole, but you would be subject to taxes and an early withdrawal penalty of 10% if you are not at least 59.5 years old and you don’t do a direct rollover into another plan.

      The old employer won’t be able to simply refund your contribution in order to eliminate the penalties, taxes, etc. My suggestion would be to simply roll over the previous 401k to your new employer’s plan. Granted you probably won’t be able to see a match on that money but you can at least maintain its tax-deferred status and avoid any penalties.

      There is a new provision in part of the pension protection act of 2006 that will allow a return of deferrals to an employee within 90 days if they are making deferrals based on an automatic contribution arrangement. Unfortunately this only applies to plan years after 2007 and you would have to be subject to being automatically enrolled into that plan.

      So in short, no you are in all likelihood out of luck in having those contributions undone.

25. QUESTION:
    401k with company match contribution are all traditional 401k?
    is it true that if you have a 401k with company match contribution, it is for certain the 401k is to be a traditional 401k? therefore, we cannot do a direct roll over to a Roth IRA incase of leaving a job?

    I cannot tell if my 401k is a traditional or a roth, how do i tell?

    • ANSWER:
      A tradtional 401k deducts money from your paycheck before taxes. A Roth 401k deducts money from your paycheck after taxes. Your employer should be able to tell you if you have a Trad. or Roth but you can look at your paycheck at the deduction.

      If you have a tradtional 401k and leave your employer you can roll it over into a tradtional IRA without penalty. If you roll it over into a Roth IRA you will have to pay tax on it. FYI, 2010 you are allowed to roll over a tradtional IRA into a Roth and pay the tax penalty over 2011 taxes and 2012 taxes.

26. QUESTION:
    Hillary’s 401k government match of 00, is that in addition to my company match? How will this be funded?
    TV said that she would “tax state governments that make over 7 million” or something to this affect.

    Why should my tax dollars be used to give to someone else’s retirement?

    How about instead of a government match we just lower taxes for every taxpayer by 00.00, a flat amount?

    • ANSWER:
      I haven’t read the bill but I believe that the ,000 401K match is for people that work at places that do not offer a 401K plan so this would be a personal 401K that the government would place matching funds, those of us whose employer’s have a 401K are left out.

      On your question “Why should my tax dollars be used to give to someone else’s retirement?”

      Simple, this is another form of wealth redistribution, or socialism, people that don’t have it will think it is a good idea and Hillary thinks it will get her some votes (NOT mine)

      Democrats don’t do tax cuts

27. QUESTION:
    Working for a growing company – just started to offer a 401K plan without an employer match. Should I sign up?
    You basic offerings for a 401K, but because it’s “new” they’re not offering an employer match – The first time I’ve seen one offered as such – is it still wise to invest in this or perhaps use other alternatives in retirement planning?

    • ANSWER:
      Alternative retiring plan because:
      :- You have a wider option of investments to choose from.
      :- You don’t have to wait until the min 59 and half years to get the payoff
      :- You do not have to go over all the troubles of roll-over etc if you leave
      :- much easier to change contribution per month without waiting periods.
      BUT if they offer a match, it is ALMOST always better to go with the employer 401k plan.

28. QUESTION:
    Is it legal for an employer to only match 401k contributions for select employees?
    I have noticed in an anual report that the fund grew by a certain dollar figure. The dollar figure was broken down by employee contributions and invesment growth, but the total growth was more than the sum of the two expected growths. The company as a whole has been told there is no employer match, but that addiional income to the fund had to come from somewhere??
    how would i look into it further without potentially getting fired?

    • ANSWER:
      You need to look into your 401k Summary of Plan , normally you get this when you first sign up for the 401k or ask your HR/Payroll department. Some employers offer matching up to a certain percentage of your contribution and of your annual income. Some also offer employer discretionary matching/profit sharing. If this is the case not all employees may get extra money put into their account from the employer. The Plan Summary will be able to tell you what the employer contributions are and who is eligible for them. Also on the annual report their may be another piece of employee contributions that aren’t listed, like rollovers from other accounts. To summarize your best bet is to get a hold of the summary plan and review it for employer contributions or just ask HR/Payroll to help you understand the report.

29. QUESTION:
    When should I receive my 401k match?
    My employer still has not payed the match. We are a NC company. It is April already, shouldn’t they have paid by now?
    Clarification: I contribute each month. They contribute once a year. The year ended in January. They deicde then how much they will match but must match at least 1%. April and still nothing. I follow my contributions closely and they have all come out on time and as they are supposed to. Just wondering if they had a time limit they were supposed to submit their part.

    • ANSWER:
      They have until the extended due date of the company’s tax return to fund the match. That means September 15. Not what you wanted to hear, I know….but it’s the truth.

30. QUESTION:
    My employer no longer offers a match on our 401k should i keep putting $ in or switch it to a roth ira?
    There is no longer a match because of economic reasons. The 401k is in the american funds family and has done very well for me. Should i continue to put my money in or put more in my roth ira with t rowe price witch i dont fully fund each year?

    • ANSWER:
      This depends on your tax situation. Both funds will keep your money invested until you’re 59.5, so the main question is whether or not your taxes will be higher now or when you’re 59.5.

      For most people, it’s when they’re 59.5. If you have a full-time job, then the money you invest in a Roth will be taxed at their “marginal tax rate”, which is rate of the top tax bracket that you’re in — 25 or 28% for most Americans, plus another 6 or 7% for state income taxes. But if you’re retired when you start taking the money out, you’re no longer drawing a salary and you pay the full spectrum of tax rates for what you take out of your 401k.

      For instance, if a single 60-year old takes out k from his 401k and uses a standard deduction on his taxes (which assumes he’s paid off the mortgage, basically), then he deducts 50 from his income, leaving 550 to pay taxes on. With today’s tax rates, he’d pay about 00 in federal and state taxes — only about 17.6% of his k. Compare that to the ~33% he would have paid during his career if he’d invested in his Roth rather than his 401k!

      The great unknown, though, is what the tax structure will look like when you’re 59.5 years old! If income tax doubles, then you’ll be in bad shape with your 401k. Social Security concerns feed the idea that income taxes on retirement income might skyrocket. I don’t know if that will happen or not.

      So I’d recommend that you continue to fund *both* funds. This is a hedge against that possibility. If taxes go up, then you have your Roth IRA with all the taxes paid already. If they stay the same or go down, then your 401k has a larger amount that you can now pay taxes on at a lower rate.

      I’d lean more heavily towards the 401k, even though your company doesn’t match. I personally think it’s the better bet (especially for people in the 28% and 33% tax brackets).

      Good luck to you,

      Doug

31. QUESTION:
    Over-payments: Can the employer make you pay for 401K company match if they overpaid you for almost a year?
    Checking if you are paid 90 cents more than your suppose to and the company makes you pay it back, can they take the money you and them put into your 401K and what about pension.

    • ANSWER:
      Anytime a company overpays you, you have to give it back.

32. QUESTION:
    Is there a % limit to what employers can match on an employee’s 401k deferred contribution?
    Can employers only match up to 6% of an employee’s 401k deferred contribution?

    • ANSWER:
      yes that is the max

33. QUESTION:
    Should I contribute to 401k beyond employer match?
    Friends, I am 26 year old and work for a company that matches 6% of our 401k contributions. So I am contributing 6% of my salary to 401k. However, I end-up saving quite some money after paying my bills in my checking account. So, I was thinking if should contribute more to 401k? or should I look for other ways of investing? I really don’t have a time to get into stocks, what else should I invest in?

    • ANSWER:
      The short answer is NO….

      That match is an automatic 6%ROI ON TOP OF THE REGULAR EARNINGS.

      Why put any more in if you dont get a tax benefit from it???? Max it up to the company match, and put the rest in a ROTH or traditional IRA…

34. QUESTION:
    If my company only does a minimal 401k match, should I save the rest in another manner?

    • ANSWER:
      If you don’t have a lot of expensive debt (e.g., credit card at 18%), then I would take the employer’s match and put the rest in a Roth IRA. If you still can save more, you can continue to place money in the 401-K (it grows tax deferred).

      I like the Roth because you are not limited by your employer’s plan. I would aggressively attach debt though – it can really drain your ability to save for retirement.

35. QUESTION:
    Is it allowable to have your 401K “match” taken out of your own profit-sharing check?
    When I was hired at my company, and in our handbook, it simply says that “after 1 year ‘the company’ matches your 401K contributrions 100% up to 10% of your salary.

    Sounds great, right? Well, not at this company. See, we get a profit sharing check every month. And I just found out now (after a year) that the 401K “match” is actually simply taken out of the profit-sharing check! So basically you’re just matching your own contribution!

    To make things worse, there’s a 5-year vesting schedule. So if you left after 1 year, the company would get to keep 80% of their match (which came from your own profit sharing check!). Even once you’re fully vested, you’re just matching yourself with your own profit-sharing $ that you would have gotten anyway.

    I guess I am wondering if this is even legal?? Please show evidence.

    Thank you!
    What extra details are needed?

    • ANSWER:
      While you were very specific in your question, there are still a couple of details missing that will help me give you the best answer possible.

      Please email me here and I’ll ask the pertinent questions. We’ll get to the bottom of this!!!

36. QUESTION:
    Company does not match 401k contributions & does not have a Roth401k. What to do?
    What else can I do to improve retirement planning considering my employeer doesn’t offer anything helpful? They offer profitsharing but if you leave prior to seven years you get nothing. I do plan on leaving within the seven years, already in my second year.

    Other Facts:
    - No longer contributing to 401k, but contributing the max Roth IRA limit every year, invested in individual stocks returning 10-18%. Maxing Roth for last six years.
    - Saving 30% every pay period w/direct dep. to online savings acct to build up liquid emergency funds & siphoning excess to Brokerage acct for investing.
    - Contributing approx. 6K/year to Brokerage account invested in no -load index funds returning 8 – 15%. Aggressive growth portfolio.
    - Purchased insurance policy to build up cash value and create something for beneficiaries
    - Age: 32, good health/non-smoker, renter (housing in area runs over 800k), no dependants, no liabilities

    What do you advise in my situation? Thank you for your help.
    Thanks for all the input. To clarify further, I have a EIUL (Equity Indexed Universal Life) policy to create an estate for surviving family members/heirs. It tracks the S&P cap @ 12.5% min 1%; can borrow the cash value built up for my retirement if needed. Re: pre-tax exclusion 401k offers, logic behind not to do so is b/c I’m in a low tax bracket below 60K & salary isn’t expected to exceed single contrib limit. Also contrib to 401k are harder to withdraw compared to a Roth; IMO it’s asinine to pay loan on monies that are mine to begin with. I rather be taxed now w/Roth than later b/c I’m in a low bracket now, 40 years from now I will be in a higher one but I probably won’t have the same investments in a Roth, brokerage or 401k. Even if I did fully contribute to the 401k it doesn’t perform as well as my brokerage & Roth. Perhaps I misunderstand the importance of lowering my present tax bracket re: investing and how a 401k can balance my overall assets. Any further ideas greatly apprec.
    Wanted to get a even million EIUL policy but underwriting couldn’t justify it. Result, 500k EIUL & the basic 110k w/work. Honestly as we all know 600k doesn’t really leave much for surviving family. Although in good health I never take it for granted that I’ll live until the mortality stats i.e. 86-94. Hence the need for the life insurance/protection. Re: the co profit sharing digdown… you raise interest’g points, however the primary reason why I’m not concerned is b/c the percentage is really low if under 4 yrs w/the company. digdown… can you cite any sources for your vesting info u suggest? Thanks.

    Lastly, re: the emerg funds I like to view it as what is the largest check I can write OR what is the largest withdrawal I can make today. In case of an emergency the last thing I want to do is shuffle assets and/or liquidate inorder to obtain a sizable amount of funds in a short amount of time 48 hours or less.

    • ANSWER:
      You are doing the right things. Maxxing your Roth IRA is perfect and I am also in favor of the EIUL because it provides you a vehicle in which your investment portion accumulates tax free and an EIUL also allows you to withdraw monies tax free.

      The problem that most folks don’t appreciate with an IRA or 401K is that the trade off for having your initial investments made with pre-tax dollars cause you to have to pay considerably more in taxes on the eventual withdrawls.

      The best way to visualize this is the case of the farmer. Is it better for the farmer to pay taxes on the purchase of his seed or on the value of his harvest? Everyone has a choice pay tax on the “seed” Roth IRA, EIUL, VUL or pay tax on your “harvest” 401K, IRA, 403B. The larger your “harvest” grows the more taxes you pay. Why do you think the government is pushing 401K and IRA? A good clue is in the fact that you MUST beginning withdrawing from your 401K and IRA when you reach 70.5 whether you need to or not. They want their taxes!

37. QUESTION:
    how much does bloomberg match for 401K contributions?
    Looking for what the trend is these days?
    Update: Say I was working for bloomberg and what is bloomberg (or similar companies’) policy for matching employee contributions.

    • ANSWER:
      like you work for bloomberg? no company that houses your 401k will match your funds. your employer matches them. and this should have been evaluated when considering any offer for employment. matches range from a piddly 50 cent on the dollar up to 3% or so to : up to 8% (which is the best i have ever heard of).

      there are no going rates, it’s what your employer offers. if you’re confused, call HR.

38. QUESTION:
    My employer offers a 401k without a match.I want to open a roth IRA,is an ETF or index fund better?
    I am more concern ed about the tax implications.I am currently in the 25% bracket.

    • ANSWER:
      25% tax bracket….boy you’re not going to reap much benefit with the ROTH. Without a doubt you need to be putting money into both with the majority going into the 401k. Benefit of the ROTH comes only with lower tax bracket contributions and larger tax bracket distributions.

      That being said..inside the ROTH the investment is irrelevent..there are no tax implications.

39. QUESTION:
    How much does UPS match up when you put money in the 401K?
    I just applied for the UPS 401k plan and watned to know how much precentage they match with what you put in.

    • ANSWER:
      Umm, ask your HR rep or you should have been given a Summary Plan Description at the time you enrolled or shortly thereafter. I would find it hard to believe that a large corporation like UPS would not provide such information to employees when they are hired or given enrollment materials.

40. QUESTION:
    if my company matches my 401k would the Roth match be less than traditional or the same?
    I’m wondering if the company match part is based off the gross of my check or the net for a Roth

    • ANSWER:
      The company match is always per tax even if you are contributing to a Roth 401K.

41. QUESTION:
    Should I invest in a employers 401k even thought they don’t match?
    I make 00 bi-weekly. I want to start saving for retirement so I’ve decided to invest in my employers 401k plan. My employer does not match. How much should I contribute bi-weekly? Are there better options out there?

    • ANSWER:
      I would just invest on my own if they don’t contribute and theres no other benefits. You can put 5000. in an IRA yearly , its tax deductible and you can pick your investments.
      Contact an investment firm and they can set up a monthly purchase plan.

      Before you lock your money away in 401, look at what their rate of return is and what they are investing in, is there any insurance if the market crashes etc….at least with your IRA you can sell out of one company at any time, put it in gold, cash or bonds.

42. QUESTION:
    If your company offers a 401k plan, with a 50% company match, what does that mean?
    If your company offers a 401k plan, with a 50% company match, what does that mean

    • ANSWER:
      It means you take it and don’t even think about it.
      That is a great benefit.
      Ex: You put ,000 a year – they will give you (for free) 0…

43. QUESTION:
    Do employers who match 401k contributions usually offer to match for 401ks setup with their bank/broker?
    Is that how this is usually handled?

    • ANSWER:
      Usually, is not a good term to use in this context. It is a lot like asking “what do people usually name their 3rd child?” or “what color car do people usually buy?”. It various so much that the term ‘usually’ has no meaning.

      An employers’ 401K plan, if it offers a match and if it offers self direction through a bank or broker (perhaps only 1/10 offer self direction) will usually offer to match your contribution at a rate (25, 50, 100%) up to some maximum amount. Their money is forwarded to the bank or broker in the same way as your contribution, but some only deposit their matching amount at the end of the year. However, some will only match if you buy and hold company stock with it. I’ve never heard of a 401K (and doubt if its legal) that offers to match amounts placed with banks/brokers that are not part of the employers 401K official plan.

44. QUESTION:
    As a Bank of America Associate, how much does the 401k plan match?
    ?

    • ANSWER:
      You should definitely ask someone in HR/Benefits to verify this, but I believe it’s up to 5% of pay. This doesn’t kick in until you complete 1 year of service.

45. QUESTION:
    If my employer offers a 401k, but not a match, should I participate?
    The 401k is managed by a third party company. I already max a ROTH IRA, what are some other alternatives?

    • ANSWER:
      I would probably go with the 401k despite the lack of match. An IRA is the next best thing, but you’ve already got that.

46. QUESTION:
    is there a time limit for companies to match 401k contributions?
    our employer hasn’t matched 3 checks but our contribution was taken out
    the problem is we have a union so they are required to match per the CBA

    • ANSWER:
      Most likely you should have been notified some how that your company had suspended their matching for 401(k). In this economy, a lot of businesses have had to stop the match to keep people employed.

      I would look through past correspondence from your HR people and you should find this out. Also, at my company, I don’t see the company’s match until I get my quarterly statement.

47. QUESTION:
    how do I calculate/know if I am maximizing my employer’s 401K match?
    Take an example of salary let us say 50K. and employer match is 6% of salary 50 cents per dollar contributed ( I belive that is standard). And my contribution is 13%. Also, if there is any formula/calculator for calculating this. It would be very helpful.

    • ANSWER:
      Check with your HR people to be sure, but if the employer is matching 50 cents of your dollars up to 6%, that implies that it caps out at 6% of ,000, i.e., ,000, of your money, and employer’s contribution would be ,500. But do not stop there simply because the employer does — the tax shelter makes it worthwhile to save as much as you can afford. Your 13% is a very good figure indeed. One issue that requires attention: how is the money being managed? Be sure that you know, and preferably don’t leave all of it in your employer’s stock.

48. QUESTION:
    Does a company’s 401k contribution match count as part of the 500 limit?
    For example, my company’s 401k matching program matches [FAQ-QUESTION].25 for ever I put in. If I want to max it out, do I personally contribute 500 and the company adds another 75 (500 * .25 = 75), or do I put in 400 and the company adds 00 (400 * .25 = 00)?

    • ANSWER:
      No.

      The 15,500 limit is only referring to employee dollars.

49. QUESTION:
    I have been with company more than a year now and can now contribute to 401k they will match up to 4%?
    my question is how much should i be contributing ? just the 4% ?
    I plan to contribute at least the 4%, but have read thats all i should put in company, and the remaining 6% into a Roth, someplace else, does it really matter?

    • ANSWER:
      As much as you can afford to, at a minimum 4%. As someone on here said, (another question), time is your best friend. It’s also a tax break for you. Try to do 10%. But at a minimum 4% so you can get the “free” money.

50. QUESTION:
    What is a good 401k match?
    Hey everyone. I just got my first “real job” about of college about a month ago. They are offering me a 401k with a match up to 3% and then 50 cents to my dollar up to 5%. Would this be considered good, bad, or in the middle? Thanks.
    I just turned 23, and i am currently investing 5% of my salary into the 401k monthly.

    • ANSWER:
      I think that is a very good match. I get 50% up to the first 7% of my income. Really, any match is a good match, as it is basically free money. Take full advantage of it. You should also work on saving 3-6 months pay for an emergency fund, and if you have that, and max out your 401k contribution, open an IRA or ROTH IRA. If you max those out as well, than start buying real estate, stock, bonds, or other riskier investments. If you are 25 now, you need to save about 5 a month to be a millioinaire by the time you retire. Good luck!!!