Emergency Fund vs Debt Free

[disneysteve]

I've seen a few 401(k) plans lately that have a tiered vesting system in the company match (After year 1, you're only 20% vested in matches, year 2 = 40% ... year 5 =100%). Anyone else seen plans like this? It makes perfect sense from an HR standpoint ... tool for retention. I'm just curious how many people have a similar provision in their plan (specifically, how many people do but don't know about it). For me, it's bittersweet to see that my company has given me $x of "free" money, but I only own $x/5 of that right now (even less if you take out the earnings on the 80% of the match that I'm not vested in).

My wife's plan didn't have a tier vesting, just a straight vesting. She had to be there for 2 years to get the matching funds.

[olga1311]

I've seen a few 401(k) plans lately that have a tiered vesting system in the company match (After year 1, you're only 20% vested in matches, year 2 = 40% ... year 5 =100%). Anyone else seen plans like this? It makes perfect sense from an HR standpoint ... tool for retention. I'm just curious how many people have a similar provision in their plan (specifically, how many people do but don't know about it). For me, it's bittersweet to see that my company has given me $x of "free" money, but I only own $x/5 of that right now (even less if you take out the earnings on the 80% of the match that I'm not vested in).

My plan is like this. Under my 401K my employer only matches after the employee has completed one year of service. Also the vesting schedule is for 6 years where the employee is 20% vested at the end of 2nd year and 100% vested at the end of 6th year.

I probably should have said "depending on your 401K plan and your vesting schedule and employer match it might make sense to stop contributions". I mean if I was in OPs situation , in my first year of employment it would make a lot of sense for me to stop contributing for a little bit while I ma getting out of debt since I am not even matched for first year. So I think as you said it might make sense depending on individual situation.

[anonymous_saver]

I vote for saving 1 month worth of an emergency fund, and then paying down your student loan in less than a year.

As for your retirement savings, 15% is a great start. Congrats! I would instead put only up to your employers match, and then try to fully fund a Roth IRA. After you are able to fully fund the Roth IRA, I would then start increasing the 401(k).

[am_vanquish]

My wife's plan didn't have a tier vesting, just a straight vesting. She had to be there for 2 years to get the matching funds.

According to a quick google search 70% of all 401k plans have some form of vesting requirement. I might start including an inquiry about vesting requirements in my standard response on this board regarding matching contributions.

[disneysteve]

According to a quick google search 70% of all 401k plans have some form of vesting requirement. I might start including an inquiry about vesting requirements in my standard response on this board regarding matching contributions.

In my wife's case, she didn't have to be vested for the company to contribute the match. She only had to be vested to actually have control of that money. She got the match from day one but had she left the company prior to the 2-year mark, she would have lost the matching funds.

[nmboone]

Walgreens is pretty good about the matches. $2 for every $1 I put in plus if the company earns extra profit they split that with profit sharers as well. It's actually called a profit sharing plan rather than a 401k. You get certain percentages of the money Walgreens gave you depending on how many years you've been there. In 6 years you get 100%. In December I'll have been there 6 years.

[LivingAlmostLarge]

My DH gets 100% vesting of his 401k match immediately. I think it's 2% for the first 3%.

[toboramai]

I am vested after 1 year which I just met. Matching is up to the discretion of the firm and the firm profits so there is no guarantee. Its a private firm. I do get a significant tax reduction by contributing as I am in the 25% tax bracket.

My loan payments only require $150 a month, but I have been paying around $900 + a month. Based on comments here, I think I will pay $300 a month on my loans and put the rest in savings until I have 10k. I already have 2k in an emergency fund.

Thanks everyone!

[Mydebtregret]

By not saving now you are for fitting years/months of compound interest your money could be earning in a savings account. I highly recommend you save while you pay off your student loan, or at least save enough to cover an emergency, lay off from work, or unexpected expense such as car repair.
Great question, hope your plan works!

[elessar78]

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