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I didn’t say they were taking anything back. What I said is it’s not free money. It’s not free money. Your employer has accounted for the employer match as part of your compensation package. If you accept it, they have planned for it. It’s not “free” money as it’s been accounted for by your employer as compensation to you even if you don’t take it. Should you choose not to take any of your elective compensation you are giving it back to your employer(since they anticipate you taking it) instead of taking it for yourself.
My point should be clear and the fact you continue to try and argue against suggest you don’t understand a very basic concept of total compensation
Read your posts again. You can’t give back what you never took in the first place. The company only anticipates on giving a designated match based on historical contribution rates.
Read your posts again. You can’t give back what you never took in the first place.
On an individual level you certainly can
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The company only anticipates on giving a designated match based on historical contribution rates.
Do you care personally about the company’s aggregate accounting? Is it somehow escaping you that I’m not discussing a company’s aggregate account but rather an individual’s personal situation? If my company offers me a 4% match on a 1:1 basis it is not “free” money if I take advantage of it, it’s offered to me as part of my total compensation package. If I choose to not take full advantage of any of my compensation package I am giving it back to my employer
I find most employer match to be a shady practice because it is for 401k plans of their own which includes some very high expense funds. Then they have the limits of vesting after 2+ years or so. Which means that after you invested 2 years into these funds the company match becomes fully yours to vest. So you maybe paying out hundreds each month in fees to these funds. I quickly rolled the funds out to my own self directed 401k where I get to select my own funds.
I find most employer match to be a shady practice because it is for 401k plans of their own which includes some very high expense funds. 1
Which doesn’t go back to the company so how is it shady?
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Then they have the limits of vesting after 2+ years or so. Which means that after you invested 2 years into these funds the company match becomes fully yours to vest.
Still not shady. You contributions are always yours. Vesting schedules are a retention tool
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So you maybe paying out hundreds each month in fees to these funds.
Unlikely but doesn’t counter obtaining the match in any way
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I quickly rolled the funds out to my own self directed 401k where I get to select my own funds.
Given your clear lack of understanding I’m not sure anyone should follow your advice
Do you care personally about the company’s aggregate accounting? Is it somehow escaping you that I’m not discussing a company’s aggregate account but rather an individual’s personal situation? If my company offers me a 4% match on a 1:1 basis it is not “free” money if I take advantage of it, it’s offered to me as part of my total compensation package. If I choose to not take full advantage of any of my compensation package I am giving it back to my employer
Not taking advantage of the company match is giving up part of your paycheck. The company match isn’t free money at all. I don’t need the look up the definition of a 401k because I know what it is and it is irrelevant to my point
You said, and I quote from your post:
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It’s much worse than free money. It’s giving up part of your pay check back to the company, it’s not free but you’d be giving back to the company otherwise
That's sheer nonsense. Either you had a terrible time articulating what you meant to say, or my point stands.
There is nothing about a 401(k) that involves "giving up part of your pay check back to the company". N-O-T-H-I-N-G.
And as for "the company match isn't free money"... what, precisely, do you think it is? If you start from the premise that nobody should be contributing to a 401(k) (which would dovetail with not having the slightest idea what a 401(k) is), then sure... "Oh, it's terrible, you have to spend a dollar to get a dollar!" But if you actually know what a retirement account is and what it's for, and start from the premise that everyone should be contributing until it hurts and then a bit more... suddenly, that "free money" is just that... money you wouldn't have had otherwise.
So, please, feel free to try again, and carefully think about the point you want to make and then ensure that the words you type communicate that point. It doesn't need to make sense to you... it needs to make sense to your reader.
Since the "free" money is invested and hence subject to the vagaries of the markets, it's just part of your annualized return... it improves it, but is only a 100% return for those few matched dollars and only until a change is posted.
As for the .01%, I was just talking to a friend at dinner last night. He engages in various forms of arbitrage and can see 10X returns at times. Of course, he's also at hideous risk, and you have to put up tens or hundreds of thousands of dollars. He can make a mint, or lose it all. In that world, a mere 100% return is a piffle
Of course it is only 100% return up to limit of match but it is real money with no risk that you can invest as you please in your 401K - anyone would take it. The rest is just market risk - not the same thing.
BTW - I know about risky trading. I was a SEC licensed trader and was an arbitrage trader for corporate accounts for a period. I worked with a bunch of former CBOT traders in the CHX trade building.
Hey guys - After researching and speaking with several financial advisors I have been told that the ideal contribution percentage to save for retirement is between 15% and 20% of gross income. My current employer offers 100% match on the first 6% that you contribute. Currently, I have my contribution set to 10% out of each monthly paycheck. Would my total contribution be considered 16% since my contribution is 10% and my employer is matching 6% or would I need to contribute 15-20% not including company match to hit the ideal percentage that most advisors recommend. Thanks!
Your total contribution is 10% and here is why: these models are based on how much of your income you are spending and therefore what it will take to replace that income.
If you are contributing 15-20%, you are spending 80-85%.
If you are contributing 10%, you are spending 90%. It takes a bigger pile of money to replace 90% of your income than to replace 80-85%. And you're contributing less, so it will take YEARS longer to get there.
The employer match is great, but does not change the fact that you are spending 90% (not 84%).
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