52

Many employees don't contribute enough to maximize the match, so the cost to the employer is not the same. Under the 50% of 6% strategy an employee contributing 5% would get a 2.5% match not a 3% and that saves the company 0.5%. @TTT provided an excellent link in the comments below to a study titled "How much employer 401(k) matching contributions do ...


47

Why? Simply: because it has been mandated as law, and so you may have no choice in the matter whether to contribute or not. Quoting from GOV.UK – Workplace pensions: ‘Automatic enrolment’ A new law means that every employer must automatically enrol workers into a workplace pension scheme if they: are aged between 22 and State ...


47

This creates incentive for the employee to contribute more and increases the funds under management of the 401(k) plan. The size of the plan influences the fees that are charged in each of the funds offered. (The more assets under management, the better for those in the plan.) More importantly, 401(k) plans are not allowed to discriminate in favor of highly ...


27

Another factor to consider is that it encourages employees to contribute more into to the plan so that they'll be able to comfortably retire. Getting the full match encourages people to put at least 6% in to avoid leaving money on the table; 100% of the 1st 3% would see a lot of people only putting 3% in instead. While 9% of your income is still a rather ...


19

Contributions to 401k plans have to come from the wages that the employer is paying you, and cannot be made from external funds. Many plans will allow for a large percentage to be withheld from a single paycheck or from the remaining paychecks for the current year, and for that time, you can live off the surplus of cash from the sale.


17

The key clause is this: 1% of eligible compensation each pay period. If you are hired mid-year, you would be eligible for 1% of the remaining paychecks. If you contributed $19,000 from the first paycheck of the year, you would only receive 1% of 1/26th of your pay. If you contribute 10% of your pay, you will still get $38.34 in match. One percent stays ...


17

No one at fidelity told you to save more. Some poorly coded notification system suggested you save a higher percentage of your income with no consideration that your current election is taking you within spitting distance of the maximum. It's probably important to remember that the custodian is just a vendor of the company you work for. You're entering a ...


16

Yes, they are within their rights to do so. The dollar limit of $18,000 (in 2015) and percentage limit of 100% are the maximum an employer can allow an employee to contribute, but the employer can set a lower limit. http://www.smart401k.com/Content/retail/resource-center/retirement-investing-basics/maximum-contribution-limits says: Contribution limits ...


16

Employer contributions do not count toward the individual contribution limit, which for 2017 is, 18K. However they do count toward the combined contribution limit, which for 2017, is 54K. See this link for a less timely explanation.


15

I moved from a job that did not have a 401k plan to a job that does have a 401k plan. I have not contributed to any other IRA or 401k so far this year. Because you have not contributed any money to a 401K plan this year, you can put the full amount into your 401K by the end of the year. Keep in mind that that for the purposes of the $18,500 or $24,500 ...


14

Even if you expect to work you might not be able to due to health reasons or economic factors that make it difficult to obtain employment, so it's good to have a safety-net. A pension scheme, especially if it's tax-advantaged or there's a company-match, can be a useful savings scheme. So even if you're still working when you reach normal retirement age, it ...


11

I wrote a brilliant guest post at Don't Mess With Taxes, titled Roth IRAs and Your Retirement Income. (Note - this article now reflects 2012 rates. Just updated) Simply put, it's an ongoing question of whether your taxes will be higher now than at any point in the future. If you are in the 25% bracket now, it would take quite of bit of money for your ...


10

Your total contribution to 401k plans is limited to $17,500 for 2013. Employer matching contributions do not count towards the $17,500 limitation, as you have already found out. You have contributed $14,500 for 2013 to your 401k plan with your previous employer. What if between the two plans, you have already exceeded the 401k contribution limitation for ...


9

Because 401k's are also used by self employed. A person who has a schedule C profitable income can open a 401k and "match" in whatever ratio he wants, up to 25% of the net profits or the limits you stated. This allows self-employed to defer more income taxes to the future. Why only self-employed? Good question. Ask your congressman. My explanation would be ...


9

Roth IRAs are not subject to a Required Minimum Distribution, so any difference in age will not affect the investing outcome. The older member of the couple will be able to access the funds sooner without penalty, however. http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions Edit: Note that inheritance upon ...


9

There are two problems with your understanding: The companies I have worked for match based on a percentage of your salary. That is a percentage of your gross pay. It was not based on the percentage of your net pay or after-tax pay. Net pay would be too hard to know. What I mean is the amount of insurance, HSA, Flex spending accounts, etc. determine how ...


9

Yes, the contribution limit includes anything contributed to your HSA, whether added by you or your employer. From IRS Publication 969: Employer contributions. You must reduce the amount you, or any other person, can contribute to your HSA by the amount of any contributions made by your employer that are excludable from your income. This includes ...


8

A fascinating view on this. The math of a 10% deposit and projected 10% return lead to an inevitable point when the account is worth 10X your income (nice) and the deposit, 10% of income only represents 1% of the account balance. The use of an IRA is neither here nor there, as your proposed deposit is still just 1% of your retirement account total. Pay off ...


8

Can I withdraw up to $27,500 without any fees/penalties/taxes/implications? Absolutely. For the details see Form 8606 - Nondeductible IRAs, which you'd file if you took a Roth IRA distribution. In Part III, line 22, you enter your basis in Roth IRA contributions. If it's more than what you withdrew (line 19), the taxable amount would be zero, and no ...


8

There are generally two key percentages in a match program: the match ratio, and the match cap. The match ratio is how much money the employer will contribute for each dollar that you contribute. The match cap is the most you can contribute with it still being matched. Your company is telling you that the match ratio is 100%, and the match cap is 1%. So if ...


8

The Roth IRA contribution income limit is based on the current year (2019)'s MAGI. If you are not sure whether you will be over the limit or not, you can 1) wait until January 1 - April 15 of 2020 to contribute to Roth IRA for 2019, or 2) do a "backdoor Roth IRA contribution" (assuming you have no money in pre-tax IRAs). If you have already contributed to ...


7

The strength of your plan is that you have considered that if you contribute early the the 401K you might not get the match, so you do stretch it out for the entire year.. One benefit to putting money into the HSA early is that it will be available if you need it early in the year if you have a major medical emergency in the first quarter. If you need to ...


7

No. New Deposits to a Traditional or Roth IRA must be cash. Conversions are a different story, so the Traditional IRA contents need not be sold to convert to Roth. See IRS publication 590 chapter 1 – Traditional IRAs: Contributions, except for rollover contributions, must be in cash. [...] ... and IRS publication 590 chapter 2 – Roth ...


7

Having money held from one paycheck hardly counts as being covered by a retirement plan in my book! It's not your book that counts, it's the Congress' book called the Internal Revenue Code. No, you cannot rescind a contribution after the fact. Maybe during the year you can do something with employer balancing it out, but not after the year is closed. (That,...


7

No. No. No. Standard federal candidate political donations are limited to $2700 per candidate per election. The primary and general elections are different elections for this purpose. Source: http://www.fec.gov/pages/brochures/citizens.shtml There are no tax implications to a campaign contribution. Even if you contribute to the campaign of someone to ...


7

The first employer matching contribution gets taken back. You don't want to mess around with over contributions like this. In addition to withdrawing over contributions, they withdraw some portion of investment gains. The accounting gets complicated so best to avoid the issue.


7

are you allowed to open multiple IRAs? Yes - but the contribution limit applies to all IRAs in total, so you cannot go over that limit by contributing to multiple IRAs. I was curious what people who want to invest more into a retirement account but don't have a 401k usually do. Invest in non-retirement accounts: 529 and other education savings plans ...


7

It is not possible to put money into a 401k other than through payroll deductions. If your employer’s plan limits the amount you can put in, there’s nothing more you can do. By the way, the employer’s contribution doesn’t count toward the $18,500 limit.


7

No. This account, along with IRAs, can only take 'deposits' in cash. They may accept transfers from similar tax status accounts "in kind", e.g. I can transfer assets from my pre-tax IRA to my Traditional Solo 401(k), or Roth IRA asset to a Roth Solo 401(k).


7

You didn't mention how old you are, which may be a factor, but as you observe you are already contributing the maximum you can to a 401(k) (or at least close to it). Most retirement systems have some sort of "retirement calculator" that look at your current savings rate, time to retirement, other retirement assets, and cost of living to determine if you are ...


Only top voted, non community-wiki answers of a minimum length are eligible