| Max 401k limit or just company match? |
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bldgengineer
New Poster
Cash: $ 0.45
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Location: Chester MD
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| Max 401k limit or just company match? |
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I'm kind of at a quandary. My company's match is horrible at 50% of the first 3% so I'm trying to decide whether or not I should force going to the IRS max allowable contributions or go to the company match and put my money elsewhere. I'm also starting over again at 31 years old. I lost all my savings back in 2009 but luckily my union pension is still there.
What would you suggest I do? I'm an hourly employee and thankfully get a hefty amount of overtime each year but the company won't tell me if their percentage cap is based on base salary or total gross pay.
Thanks for any advice!
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Sat Oct 27, 2012 7:18 pm |
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oldguy
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Location: arizona
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quote:
My company's match is horrible at 50% of the first 3% so I'm trying to decide whether or not I should force going to the IRS max allowable contributions or go to the company match and put my money elsewhere. I'm also starting over again at 31 years old.
The company match is 1.5% of your gross income - so that's free money - you definitely want to capture that, as you said. Whether you want to invest more in the Plan has a lot to do with the Plan's investment choices - the important factor is the return, you need a choice that will allow you to get an 11%/yr return such as an SP500 Index Fund. If that is an available choice, I would go for the entire $17,500/yr.
$17,500/yr at 11%/yr would be $3,500,000 when you are age 60. (a bit more when you add in the 1.5%).
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Sun Oct 28, 2012 3:18 am |
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bldgengineer
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Cash: $ 0.45
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Joined: 27 Oct 2012
Location: Chester MD
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@Coastal - I've already sent emails to HR, the plan administrator and Merrill Lynch. We'll see what happens but I doubt I'll get an answer. They dropped our bonuses because someone sued and won a lawsuit claiming they didn't get their full bonuses because the company was basing it on a percentage of the base salary and not the full salary with overtime included. Lord help me for bringing up the same question on the 401K
@oldguy - I'm still putting money in but its only 10% of my salary. Merrill Lynch has plan rebalance feature that lets you let them rebalance the plan according to your goal length. Right now its a 97% mix of funds and 3% bonds. The funds are mix of equity, growth, and foreign growth funds.
What exactly would I do with 3.5M in 401k? If its returning 3-5% on its own through dividend and interest I could live off that itself
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Sun Oct 28, 2012 2:00 pm |
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clydewolf
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Cash: $ 50.25
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| Re: Max 401k limit or just company match? |
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quote:
Originally posted by bldgengineer
I'm kind of at a quandary. My company's match is horrible at 50% of the first 3% so I'm trying to decide whether or not I should force going to the IRS max allowable contributions or go to the company match and put my money elsewhere. I'm also starting over again at 31 years old. I lost all my savings back in 2009 but luckily my union pension is still there.
What would you suggest I do? I'm an hourly employee and thankfully get a hefty amount of overtime each year but the company won't tell me if their percentage cap is based on base salary or total gross pay.
Bldgengineer,
I am with Old Guy on the matching part. They are matching your contribution up to the first 3% of your earnings. If your base pay is $1,000/week and you contribute 3% or $30, your employer will add another $15.
Now if you have $200 in OT, your contribution will be $36, and your employer will contribute an another $18.
Always contribute to qualify for the employer matching contribution.
If you do not like the investment options in the 401k plan, you can contribute to an IRA, up to the lesser of your annual earned income or $5,000 for 2012. You have until April 15, 2013 to make your 2012 IRA Contribution.
The contribution limit for 2013 is $5,500.
If you are over age 50 at any time during the year you can increase that year's contribution by $1,000.
And if you are married, you can make a spousal contribution to her IRA of up to $5,000 (2012 limit) or in 2013, $5,500 limit).
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Tue Oct 30, 2012 10:58 pm |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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quote:
What exactly would I do with 3.5M in 401k? If its returning 3-5% on its own through dividend and interest I could live off that itself
Yes, that works. That gives you about $140k/yr, that should be about right in 2040. At age 70 1/2 you have to take out an RMD each year, that's about the 4% that you mention. You pay ordinary income tax on it and spend the rest. . Persoanlly, I keep ours invested at about 7% or 8%, sell off 4%, and leave the 3% growth to offset inflation. Remember, you may be retired for 30 or 40 years, that 140K is good in 2040, not so good in 2080. (you'll only be 99, it happens) 
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Tue Oct 30, 2012 11:29 pm |
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