401k w/ graded vesting

[MisterServer]

the company I work for only matches 401k contributions $.50 to the dollar up to 12%. Thing is there's also a graded vesting schedule that is 25% in 2 years and 100% in 5 years (each year is another 25% increased vesting). I see posts saying to contribute the max company matching but is it even worth it with only partial matching as well as graded vesting?

 

[Queasy]

Yes.

 

[newb111]

Definitely worth it.

 

[spidey07]

You don't like free money?

 

[RaiderJ]

Matched 401k investments are the closest thing to free money you can get. And it's free COMPOUNDING money at that! Some math:

You invest $100 BEFORE taxes. Company invests $50.
After one year, you have $150 + 110% (or so).
Your pre-tax $100 is now worth $165. Not bad for one year!

 

[SuperNaruto]

If you plan to quit, i wouldn't even put any in.. as you lose 75% if you leave after 2 year... so if you plan on putting it in.. plan on staying for 5 years..

 

[jmcoreymv]

Originally posted by: MisterServer
the company I work for only matches 401k contributions $.50 to the dollar up to 12%. Thing is there's also a graded vesting schedule that is 25% in 2 years and 100% in 5 years (each year is another 25% increased vesting). I see posts saying to contribute the max company matching but is it even worth it with only partial matching as well as graded vesting?

AFAIK, the graded vesting only has an affect if you separate from the company before you are fully vested. So if you stay the full 5 years, you get to keep 100% of the employers contributions during those 5 years.

 

[spidey07]

Originally posted by: SuperNaruto
If you plan to quit, i wouldn't even put any in.. as you lose 75% if you leave after 2 year... so if you plan on putting it in.. plan on staying for 5 years..

<amir> This is terrible, this idea. <amir>

He doesn't lose anything, only a percentage of what the company matched.

Free money is free money. Max that puppy at 12%. It's like giving yourself an 8% raise (6% + tax deferred).

 

[RaiderJ]

Originally posted by: SuperNaruto
If you plan to quit, i wouldn't even put any in.. as you lose 75% if you leave after 2 year... so if you plan on putting it in.. plan on staying for 5 years..

You don't "lose" any money, you just don't get to keep the full match. However, any gains you get until that point you probably do get to keep. Nothing wrong with getting interest off someone else's money.

 

[patentman]

If you hand someone 50 cents and they give you a dollar do you take it? YES.

"only matches..." sheesh, my company "only" matches 0%. Free money is free money. Take it and be happy.

As for the graded vesting, you don;t lose money, you only lose your interest in the matched funds. DO it.

 

[alrocky]

If you want to retire with loads of money in your 401(k), you should invest as much money as you can and as soon as you can. You can invest $15,500 max in a 401(k) and $4000 in an IRA this year. It would behoove you to do both. A company match is pure gravy and it'd be foolish to turn down. Even if you don't remain with the company for 5 years, you'll still have increased your retirement porfolio and deferred taxes on that income - both of these are good things.

 

[JBarr]

Originally posted by: alrocky
If you want to retire with loads of money in your 401(k), you should invest as much money as you can and as soon as you can. You can invest $15,500 max in a 401(k) and $4000 in an Roth IRA this year. It would behoove you to do both. A company match is pure gravy and it'd be foolish to turn down. Even if you don't remain with the company for 5 years, you'll still have increased your retirement porfolio and deferred taxes on that income - both of these are good things.

Fixed, and I just topped off my 07' Roth today

 

[thomsbrain]

Originally posted by: SuperNaruto
If you plan to quit, i wouldn't even put any in.. as you lose 75% if you leave after 2 year... so if you plan on putting it in.. plan on staying for 5 years..

what the hell are you talking about? he'll lose the unvested match from his company, not the money he contributed.

it's still a good idea to contribute, because this is pre-tax money (that's like a 25%+ 1st-year return right there), and if you're leaving in a few years, you can just roll it over into an IRA and gain more control over the investments.

my company offers 1:1 match up to 4%, and only starts vesting after 2 years, 100% after 5 years. very similar, all in all. i contribute more than the company's match, even though i don't really expect to be around more than 2 years.

 

[Grey]

Originally posted by: thomsbrain

Originally posted by: SuperNaruto
If you plan to quit, i wouldn't even put any in.. as you lose 75% if you leave after 2 year... so if you plan on putting it in.. plan on staying for 5 years..

what the hell are you talking about? he'll lose the unvested match from his company, not the money he contributed.

it's still a good idea to contribute, because this is pre-tax money (that's like a 25%+ 1st-year return right there), and if you're leaving in a few years, you can just roll it over into an IRA and gain more control over the investments.

my company offers 1:1 match up to 4%, and only starts vesting after 2 years, 100% after 5 years. very similar, all in all. i contribute more than the company's match, even though i don't really expect to be around more than 2 years.

QFT. Invest now, and watch your peers freak out when they hit 50 with no retirement funds. It is money you won't miss and it adds up!

 

[spidey07]

Originally posted by: Grey

Originally posted by: thomsbrain

Originally posted by: SuperNaruto
If you plan to quit, i wouldn't even put any in.. as you lose 75% if you leave after 2 year... so if you plan on putting it in.. plan on staying for 5 years..

what the hell are you talking about? he'll lose the unvested match from his company, not the money he contributed.

it's still a good idea to contribute, because this is pre-tax money (that's like a 25%+ 1st-year return right there), and if you're leaving in a few years, you can just roll it over into an IRA and gain more control over the investments.

my company offers 1:1 match up to 4%, and only starts vesting after 2 years, 100% after 5 years. very similar, all in all. i contribute more than the company's match, even though i don't really expect to be around more than 2 years.

QFT. Invest now, and watch your peers freak out when they hit 50 with no retirement funds. It is money you won't miss and it adds up!

just to pound it in even more

By not contributing you are literally throwing away 100s of thousands of dollars (if not millions of FREE MONEY). Do the math.

 

[alkemyst]

Originally posted by: spidey07

Originally posted by: SuperNaruto
If you plan to quit, i wouldn't even put any in.. as you lose 75% if you leave after 2 year... so if you plan on putting it in.. plan on staying for 5 years..

<amir> This is terrible, this idea. <amir>

He doesn't lose anything, only a percentage of what the company matched.

Free money is free money. Max that puppy at 12%. It's like giving yourself an 8% raise (6% + tax deferred).

yeah...another person commenting that has no idea.

My wife works for retail and the young girls there think we are getting ripped off by me putting money into a 401k already...she just became eligible for one at her place.

Mine is 50% up to 3% (up to 5% after 5 years I believe unless it's changed).

For the 401k match it's 60% after 3years rolling to 100% at 5.

for the 401k profit sharing contribution it's 30% at 3 years rolling to 100% at 7 years.

My brother has the best deal...they will match 50% up to his limit, plus they contribute 10% of his W2 income each year to the 401k.

He is vested at day one.

 

[kranky]

Originally posted by: MisterServer
the company I work for only matches 401k contributions $.50 to the dollar up to 12%.

Only matches 50% up to 12%?

A lot of people would kill for that kind of deal. There's nothing shabby about that.

 

[RaistlinZ]

Originally posted by: kranky

Originally posted by: MisterServer
the company I work for only matches 401k contributions $.50 to the dollar up to 12%.

Only matches 50% up to 12%?

A lot of people would kill for that kind of deal. There's nothing shabby about that.

Yeah, that's a pretty sweet deal. My company only matches 100% of the first 3% of my income.

 

[jaybert]

Originally posted by: RaistlinZ

Originally posted by: kranky

Originally posted by: MisterServer
the company I work for only matches 401k contributions $.50 to the dollar up to 12%.

Only matches 50% up to 12%?

A lot of people would kill for that kind of deal. There's nothing shabby about that.

Yeah, that's a pretty sweet deal. My company only matches 100% of the first 3% of my income.

mine is 100% up to 6%, which I thought was pretty standard. from the looks of this thread though, seems to not be the case. i guess this makes up for my crappy insurance that we get (I have to get my prescriptions by mail order if I stay on 1 medicine for > 3 months), and for glasses they cant do them in store...have to mail lenses + frame out and wait 1 week to get back

 

[kranky]

Originally posted by: jaybert
i guess this makes up for my crappy insurance that we get (I have to get my prescriptions by mail order if I stay on 1 medicine for > 3 months)

Isn't 1 mail order prescription cheaper than getting multiple refills locally? It is in our plan. Local prescription is $25 co-pay and is usually only for one month of medication. Mail order is $50 but covers 3 months worth.

 

[Blain]

Contribute the max "matched" %. Then fund a ROTH IRA, if you can.

 

[grohl]

Originally posted by: Blain
Contribute the max "matched" %. Then fund a ROTH IRA, if you can.

Good point. I am lucky enough to be able to max out both each year, but I guess it would depend on the situation the company matches as to whether to max out one or another.

Let's say you have 10000 to invest in retirement. If your company only matched up to a certain amount, say the first 6000, would you stop your 401k contributions at that point and the max the Roth? Roth is after tax contributions but grows tax-free.

Same scenario, what if the company matched 25-50% up to 15,500, then I guess you would contribute 10000 the 401k and none to the Roth.

 

[Blain]

Even a 25% match is great, PERIOD! :laugh:

 

[AlienCraft]

Originally posted by: MisterServer
the company I work for only matches 401k contributions $.50 to the dollar up to 12%. Thing is there's also a graded vesting schedule that is 25% in 2 years and 100% in 5 years (each year is another 25% increased vesting). I see posts saying to contribute the max company matching but is it even worth it with only partial matching as well as graded vesting?

YES!

Mo' Money, MO' Money, MO' MONEY !!!!

< Takes the man's money and sez thanx.....

 

[alrocky]

Originally posted by: grohl
What if the company matched 25-50% up to 15,500, then I guess you would contribute 10000 the 401k and none to the Roth.

You can invest $15,500 max in a 401(k) and $4000 in an IRA this year. It would behoove you to do both.