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Old 11-08-17, 06:55 PM   #1
EJ123
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Anyone good at 401(k) stuff?

I figured that instead of solely paying off 6 figures of student loans (33% of monthly income goes to loans), I might as well contribute to my work's 401 plan especially with matching. But not sure exactly how to work this to the best benefit. I really just want to max out the matching part and that's it cause the student loans are brutal.



Does this mean all that needs to be done is putting in 2.5% on the bottom and leave the top 3 blank? Is the "up to 2.5%" meaning 2.5% of each month's income? Thanks for any help!
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Old 11-08-17, 06:59 PM   #2
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Wow I never knew it cost so much to go to school it makes me wonder if getting a job at Walmart is better that's so sad it cost so much
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Old 11-08-17, 07:13 PM   #3
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That is very confusing. You should ask HR people at work.

The 7.5 seems like it would just be automatic, why opt-in, and why would a percentage be relevant? Maybe you need to put 7.5% in there to get the free money, and uninformed employees are getting ripped off if they don't opt-in in this way?

I'm pretty sure both "Additional" boxes you would want to put 0.

And for the Employee Match box, I think that's where you would put the (matchable) max of 2.5%.
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Old 11-08-17, 11:23 PM   #4
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If I am reading it right, you need to put in 2.5% of your gross monthly income in order to get the company match of 2.5%

Example: I do 13% (to max out at $18k/yr before tax contributions) My employer matches dollar for dollar the first 8% (I have to contribute at least 8% for the match to happen) I am actually seeing an amount equal to 21% of my gross income going to my 401K. Out of pocket I am only contributing 13% though.

The Roth additional amount allows you to contribute an additional $5k before taxes above the $18K 401k cap.
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Old 11-09-17, 10:19 AM   #5
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If I am reading it right, you need to put in 2.5% of your gross monthly income in order to get the company match of 2.5%
I agree, I think that much is clear; but what's up with the "Employer 7.5%"?
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Old 11-09-17, 10:39 AM   #6
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Talk to HR to clarify for sure. It looks like if you put in 2.5% they will match 100% of that, in addition to the 7.5% they already give you. Definitely put in your 2.5% to get that last 2.5% from them.

My current place just gives 5% regardless of what I do, so I don't worry about it. My previous place had a sliding scale, they would match 100% of my contribution up to 3%, and top out at 50% of my contribution at 6%. I could put in more than 6% but they wouldn't match it past that first 3% they would kick in. So I put in my 3% to max out what they would give me, and didn't both past that.

If you want to save more than 2.5% of your salary (even if your company won't match it), it is worth looking at the cost of the program they offer. At that last gig, for me, I put in my 3% to get their 3% but their investment options had expenses greater than I could do on my own from a discount brokerage and/or going straight with Vanguard in a roth ira. At my current gig, the investment options offered are not great and I can do better expense-wise outside the plan but I am actually in a tax bracket now so letting them take stuff pretax works better.

Last edited by HardyWeinberg; 11-09-17 at 10:43 AM.
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Old 11-09-17, 10:57 AM   #7
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Talk to HR to clarify for sure. It looks like if you put in 2.5% they will match 100% of that, in addition to the 7.5% they already give you. Definitely put in your 2.5% to get that last 2.5% from them.
The language makes it look like they wouldn't match the 2.5% if EJ opts to put it in the Roth version instead of the traditional (pre-tax) contribution... maybe that's just sloppy writing.

The Roth option is usually better the longer it is before you're retiring.
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Old 11-09-17, 11:05 AM   #8
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I agree, I think that much is clear; but what's up with the "Employer 7.5%"?
Maybe the employer contribution is tiered based on years of service, job level,???
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Old 11-09-17, 11:32 AM   #9
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To be specific, Roth is best if you are in a low tax bracket when contributing and/or the same tax bracket you will be when you will be withdrawing from it.

Roth is also handy because you can withdraw contributions (not appreciation) with no penalty. It's kind of our backup college savings for our kids if our regular savings don't go far enough or we decide we really do want a nice vacation before then...
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Old 11-09-17, 11:46 AM   #10
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I read it like the employer will automatic contribute 7.5% percent of your compensation unless you elect to do more or less - probably a way that the employer "helps" make sure you're saving for retirement. If that's the case, I'd suggest only contributing 2.5% so you get full benefit of the match, then use all your other available income to pay off the student loans and not bump up retirement savings until after that.
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Old 11-09-17, 12:01 PM   #11
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Wow. That is confusing. I would discuss with your HR/benefits department. BTW...What sort of interest are you paying on your loans, if you don't mind me asking? When I got done with school back in the early 90s I was paying 9% on a little over $23K total in loans. I opted to skip retirement savings and instead paid off my loans quickly. At that time, there was no chance I'd earn 9% through investing, and I wanted to be free of debt.


Now that I am over 50, I am taking full advantage of catch-up contributions. My employer has a generous plan. My contributions are matched at about 20% if I contribute the full $24K allowed by law.
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Old 11-09-17, 12:50 PM   #12
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either was companies are doing away with the traditional retirement plans. Now if you don't contribute quite a bit yourself you won't have much for retirement.
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Old 11-09-17, 01:01 PM   #13
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I read it like the employer will automatic contribute 7.5% percent of your compensation unless you elect to do more or less - probably a way that the employer "helps" make sure you're saving for retirement.
That doesn't make any sense - but you're right, it is confusing.

How can it be an "employer contribution" if they take it out of the employee's check? But there on the form, it asks EJ to fill in "0 to 7.5%" of how much employer contribution he wants.

Maybe not everyone (part timers?) gets 7.5% and he's supposed to just fill in 7.5% as his employer contribution on the form.

My estimate is that everybody gets an employer contribution, for EJ that's 7.5%, not dependent on his contributing anything.

Everybody gets an employer match of up to 2.5% of their own contribution.

And everybody can contribute more than the match up to whatever the max is.
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Old 11-09-17, 01:15 PM   #14
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That doesn't make any sense - but you're right, it is confusing.

How can it be an "employer contribution" if they take it out of the employee's check? But there on the form, it asks EJ to fill in "0 to 7.5%" of how much employer contribution he wants.

Maybe not everyone (part timers?) gets 7.5% and he's supposed to just fill in 7.5% as his employer contribution on the form.

My estimate is that everybody gets an employer contribution, for EJ that's 7.5%, not dependent on his contributing anything.

Everybody gets an employer match of up to 2.5% of their own contribution.

And everybody can contribute more than the match up to whatever the max is.
You're probably right. Like others have said he's going to have to call HR and get clarification because we're all just guessing. Also makes me wonder who would choose to have their employer contribute less than their max, unless it came back in some other type of benefit.
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Old 11-09-17, 01:35 PM   #15
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My estimate is that everybody gets an employer contribution, for EJ that's 7.5%, not dependent on his contributing anything.
But the confusing thing is, if everybody gets it, why does the form make it seem elective, defaulting to a choice of 0%? Is that unscrupulous behavior on the part of the company, so employees that don't know to opt-in and set that to 7.5% don't get the benefit?
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Old 11-09-17, 03:57 PM   #16
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keep an eye on congress , today..
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Old 11-09-17, 05:05 PM   #17
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But the confusing thing is, if everybody gets it, why does the form make it seem elective, defaulting to a choice of 0%? Is that unscrupulous behavior on the part of the company, so employees that don't know to opt-in and set that to 7.5% don't get the benefit?
Some people might not get the 7.5% employer contribution depending on time in service, etc. I would hope the form would spit out an error if EJ puts in the wrong value.

But it's worse than that - this is a seriously confusing form. What do you think the difference is between the employee match and the employee additional? If EJ puts 2.5% in Employee Additional, and 2.5% in the employee match, what would he get - 5% witholding? Or 2.5%?

What EJ wants to do, according to the OP, is put 2.5% into his 401k so he gets the 2.5% employer match and the 7.5% employer contribution. But he's going to have to talk to HR to figure out what to put in those line items to achieve that.
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Old 11-10-17, 09:34 AM   #18
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either was companies are doing away with the traditional retirement plans. Now if you don't contribute quite a bit yourself you won't have much for retirement.
Here at the railroad we still have a good defined benefit (i.e., pension) plan and will likely for a long time to come.


But note that a pension plan is usually not a great thing if you change jobs often. There are minimum vesting requirements, and the amount of your benefit is almost always determined primarily by the number of years with the company and your salary. Maybe 10 years ago, a former employee who was about to turn 65 inquired about his pension benefit. He couldn't believe it was less than $200/month. It had to be explained to him that he only worked for the company for a relatively short time (less than 10 years, IIRC) back in the 70s and never made more than about $20K/year. Some people think pension calculations are adjusted for inflation or rises in the cost of living. They are not.
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Old 11-10-17, 10:13 AM   #19
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That's very poorly written, is there any additional info you can add? You can ask your HR Dept, but I'll bet the 401K plan is run by an outside financial firm and they'll just have you call them. If this is the case ask to see a copy of the plan's rules and see what the fees are - they're usually insanely high considering the broker has an exclusive deal with the company, especially if its a big company.

I'll guess its the employer will give a match percentage for the first 7.5% of salary you put into the plan**, then a different match (usually lower percentage) for any additional contributions after that 7.5% and up to the legal $$$ limit. Not sure about the Roth item, as there wasn't that option when I started in a plan; I have my own Roth IRA with a broker.

** = unless the percent is really low, you always want to max this out since its 'free money'. EX: You put in $100, your employer has a 50% plan so they add $50, so you make an immediate 50% return. You also get the interest and compounded interest returns on the employer's 50% addition over the life of your account, too.
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Old 11-10-17, 11:09 AM   #20
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OK here's what you do.

In the 7.5% and 2.5% boxes, put 7.5% and 2.5%. In the Additional and Roth boxes put 0.0%.

Check your next paycheck, and verify that YOU have contributed 2.5% of your gross, and your EMPLOYER has contributed an amount equal to 10% of your gross.

If not, go to HR or payroll and have them fix it.
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Old 11-11-17, 12:49 AM   #21
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Diversify with some healthcare stock included. try and hang onto that one until the last if you can......I don't mean your GF

So mind your wallet.
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Old 11-11-17, 08:40 AM   #22
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I am an enrolled retirement plan agent, I do this stuff for a living. Yes you should put in 2.5% of your pay as a pre-tax contribution, this will get you the maximum match.

I agree this is poorly presented. Why would you have elective boxes for the employer 7.5% or the match? These are functions of the plan terms.

As to whether you should put in more or put some in Roth this depends on your overall tax situation, the rate on your loans, etc. General advice, it would be good to clear the loans ASAP, but always contribute to a 401(k) to get the full match.
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Old 11-11-17, 10:15 AM   #23
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General advice, it would be good to clear the loans ASAP, but always contribute to a 401(k) to get the full match.
+1. We have a lot of younger people at my company these days. A few years ago, our HR head felt compelled to explain to them that they are leaving good money on the table by not contributing to get the full match. I believe he looked at the stats and saw how little people were contributing.
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Old 11-13-17, 05:50 PM   #24
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Wow. That is confusing. I would discuss with your HR/benefits department. BTW...What sort of interest are you paying on your loans, if you don't mind me asking? When I got done with school back in the early 90s I was paying 9% on a little over $23K total in loans. I opted to skip retirement savings and instead paid off my loans quickly. At that time, there was no chance I'd earn 9% through investing, and I wanted to be free of debt.


Now that I am over 50, I am taking full advantage of catch-up contributions. My employer has a generous plan. My contributions are matched at about 20% if I contribute the full $24K allowed by law.
You're right, chatting the HR people is likely the best, but perhaps the 2.5% is a good start! So I refinanced a private loan from undergrad recently from an average of 10% to 4.99%, so it gets tricky to balance between paying the student loan debt. My federal loans (~5-7% on income based repayment now) will hopefully go to public service loan forgiveness after 10 years, but it really is depressing trying to pay down loans opposed to heavily investing in retirement.
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Old 11-13-17, 05:52 PM   #25
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That's very poorly written, is there any additional info you can add? You can ask your HR Dept, but I'll bet the 401K plan is run by an outside financial firm and they'll just have you call them. If this is the case ask to see a copy of the plan's rules and see what the fees are - they're usually insanely high considering the broker has an exclusive deal with the company, especially if its a big company.

I'll guess its the employer will give a match percentage for the first 7.5% of salary you put into the plan**, then a different match (usually lower percentage) for any additional contributions after that 7.5% and up to the legal $$$ limit. Not sure about the Roth item, as there wasn't that option when I started in a plan; I have my own Roth IRA with a broker.

** = unless the percent is really low, you always want to max this out since its 'free money'. EX: You put in $100, your employer has a 50% plan so they add $50, so you make an immediate 50% return. You also get the interest and compounded interest returns on the employer's 50% addition over the life of your account, too.
Wow that is crazy. It is definitely an outside company (Fidelity) so will have to take that into consideration. I'll probably just do the 2.5% now, since days are busy.
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