Good News: Wife Is Getting A 401k!

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Several of you mentioned that I should increase my wife’s 401k contributions after her recent raise. Great advice, but alas, she had no 401k. We were a 401k-less family. I say were because it looks like soon her employer is giving her one! Details are a bit fuzzy, but it looks like she gets a 100% match up to 1.5%. Not going to win any employer-of-the-year awards, but hey it’s progress. I really hope the administrator is Vanguard or Fidelity, but I as long as the fees aren’t onerous and there are some index funds I’ll be happy.

$89 million dollars of employer matches were left on the table in 2003. I hope none of y’all out there are giving up your 401k matches. It’s the quintessential free money! Money gurus agree: Everyone should be contributing to max out the employer match even if you have credit card debt. Where else can you get an instant 50-100% return on your money (depending on your specific match)?

As for us, we will definitely be contributing up to the match. Then maxing out both our Roth IRAs each year. For amounts over that, we will have to decide if we should contribute money to her 401k, or instead into my SEP-IRA or Individual 401k (should I decide to set one of those up). Basically whichever account offers the best investments will get the money. But it’s nice to have options!

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  1. You can also say that about savers credit from IRS. 10-50% Additional return by simply contributing to a retirement account. But if ur making that small amount of money, you’re unlikely to have the money to contribute 😛

  2. $89 million left on the table! WOW. All that free money wasted. People should think of that money as a part of their salaries.

  3. Anonymous says

    they make way too much money to be eligible for the saver’s credit.

  4. Getting a 401k is a ticket to huge tax savings and retirement security. We feel the pinch because my wife gets to contribute to a SIMPLE IRA with annual limit of $10K as opposed to $15K for a 40wunk, hitting us with 30% of $5K in additional taxes each year. Not to mention that I get a 6% annual income match on the 401k and she gets only a 3% match…so that is a double hit. We are over the limit for roths and cannot get a tax deductible IRA so we still fund a non-tax deductible IRA hoping that the increases will still not be hit by taxes as long as we dont withdraw it.

  5. Your point about the plan administrator is key.

    Hopefully her company will select a decent plan administrator like you say. Unfortunately, this is one thing she (your wife) will have little control over. My company’s plan has 17 fund choices. All but one fund are actively managed, and all have not-so-great (but not terrible) expense ratios.

    As an employee, I think the only thing you can do to get better 401K options is to ask your HR folks. Our HR dept actually said they were open to feedback (on fund-choices) in our last open-enrollment period, but I’ve yet to see any change (maybe I’m the only one who gave feedback?).

    Otherwise, you’re pretty much at someone else’s mercy. Though, in my opinion, it’s still worth contributing to a 401K with average fund choices if there is a good company match.

  6. It almost took an act of God for one of my co-workers to finally contribute to the 401K. They were so in hock with the new cars, etc, they couldn’t afford the reduced income from contributing even though it is free money. Think we finally convinced them to contribute the minimum so they could get matching.

  7. Pragmatic Finance says

    I casually brought up finances with some of my co-workers a few weeks ago and was surprised that most weren’t taking full advantage of the 401k match. It’s pretty shocking how many people don’t take this free money.

  8. We moved our company to Fidelity earlier this year. We’ve been very happy with the service. We actually stick in 3% regardless of the employee contribution and I can’t believe the number that take no participation whatsoever in their retirment planning.

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