My job wanted to know if anyone was interested in signing up for 401K while offering Low Salaries?? (license, employees)
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I agree that contributing to the 401K is one of the best decisions you can make for your future, but be careful because it is not always so simple.
A company I know offers a matching 2% of the first 6% the employee saves. But their 401K management company fees are outrageous and the funds they offer also have high fees. In this case it's better to do your retirement savings (IRA or Roth IRA) elsewhere after getting the company match. Vanguard is a good option, getting an low cost fund (index is a good option).
Just want to note that most plans are based on the employer matching a percent of SALARY, not CONTRIBUTIONS as you set it up. They would match 50% of your contributions up to 6% of your salary, equaling a 3% salary match
If so, in the example above, let's assume the $10k contribution is actually 10% of a $100k salary. The company will contribute up to 3% of SALARY, so the match amount is $3,000, not $300. Even with a $40,000 salary, if one contributes 6% or $2,400, the company contributes 50% of that which is $1200, significantly more the the $300 match in your example on a $10k employee contribution.
That's a pretty nice chunk of change that should not be left "on the table".
Yes, thanks for fixing that. The example was under selling the value of a company match.
ON, why are you fixated on waiting 5 years to find a new job? Start looking now. If they hire you now for a higher salary after 3 years on the job, then great, otherwise stay at your current job. The ease of finding a job is based more on local economic conditions in that field than meeting a threshold.
If your economy is good, you could find the new job now. If you wait 2 more years, things may have turned and it may be more difficult in finding employment. Just find a creative way to explain your previous job hopping.
People really don't get this. Look at the 401k participation and average balance rates. My wife works for a company that does benefits for other large companies and is involved in creating the emails, postcard, web and other communications that go out and it is a struggle to get people to do it.
But, OP, based on her many conversations with contacts at her clients, the companies are seeing this as a benefit and certainly not as a way to reduce checks. I know it's tough, but just put a little in and increase it every month or two by a little until you at least get to the match or you are truly throwing money away. Money that, assuming you are early in your career will have decades to grow. You will be very glad one day.
People really don't get this. Look at the 401k participation and average balance rates. My wife works for a company that does benefits for other large companies and is involved in creating the emails, postcard, web and other communications that go out and it is a struggle to get people to do it.
But, OP, based on her many conversations with contacts at her clients, the companies are seeing this as a benefit and certainly not as a way to reduce checks. I know it's tough, but just put a little in and increase it every month or two by a little until you at least get to the match or you are truly throwing money away. Money that, assuming you are early in your career will have decades to grow. You will be very glad one day.
Yes, time to move past this "reduce checks" thought process. The company is still paying you the same, it's just some is now going into the employee's 401k account, which is theirs, moves with them when they change company's, etc.
With the money you contribute to your 401(k) going in pre-tax, your tax bracket might be lower and you'll pay less in Federal taxes. The net effect to your paycheck may surprise you.
Just want to note that most plans are based on the employer matching a percent of SALARY, not CONTRIBUTIONS as you set it up. They would match 50% of your contributions up to 6% of your salary, equaling a 3% salary match
If so, in the example above, let's assume the $10k contribution is actually 10% of a $100k salary. The company will contribute up to 3% of SALARY, so the match amount is $3,000, not $300. Even with a $40,000 salary, if one contributes 6% or $2,400, the company contributes 50% of that which is $1200, significantly more the the $300 match in your example on a $10k employee contribution.
That's a pretty nice chunk of change that should not be left "on the table".
While the math is way off in the post...I've never seen it set up as a % of salary, it's always been in my experience (not saying it's not possible) a % of your contribution. My company uses the figures stated in the example, they match 50% up to 6% - so it nets out to 3% as long as you are contributing at least 6%. Using 100k for round numbers, that means if I contribute 6%, I am contributing $6k, and they are contributing $3k. That's a pretty nice chunk of free money. Their match doesn't go up as I increase my contribution, but the balance does and that's nice too. If I contributed 4%, that would be $4k and $2k respectively. Salary is only used to calculate contribution.
With the money you contribute to your 401(k) going in pre-tax, your tax bracket might be lower and you'll pay less in Federal taxes. The net effect to your paycheck may surprise you.
Definitely agree with this - you would do well to use a calculator such as paycheckcity.com, and play with some different scenarios. In every case, your net check will not be reduced by the amount of the contribution, because your taxable income will be reduced. You'll likely find that it will hurt less than you think it will...
ON, why are you fixated on waiting 5 years to find a new job? Start looking now. If they hire you now for a higher salary after 3 years on the job, then great, otherwise stay at your current job. The ease of finding a job is based more on local economic conditions in that field than meeting a threshold.
If your economy is good, you could find the new job now. If you wait 2 more years, things may have turned and it may be more difficult in finding employment. Just find a creative way to explain your previous job hopping.
I'm not concerned that much about more money, stability is what I look for in the next job. More money means nothing if the job is unstable
I'm not concerned that much about more money, stability is what I look for in the next job. More money means nothing if the job is unstable
So why not look for a stable job that pays better?
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