Compare 401k Matches

[ewe2003]

My 401k is a 3% employee match. My GFs is 50% match up to the first 6%. Which 401k is better? Of course we want free money with the match, however we also both have Roth IRAs and want to make the best use of our money. Any feedback will help.

[dczech09]

Both of your 401k's will provide the same match. 100% of the first 3% equals a 3% match; 50% of the first 6% equals a 3% match.

What I recommend is to start by meeting the match. So put enough in your 401k to hit the employer match. Then invest in your Roth IRA up to the limit. Any additional retirement savings should be put into the 401k.

Remember that you are each allowed to invest $5,000 per year in the Roth IRA, assuming you are under the $150,000 annual household income limit.

I also would not recommend putting all of your money into retirement savings unless you are debt free (except the house). Do you have any student loans, car loans, or credit card debts? If you do, I would recommend paying those off first. If you want to meet the employer match while paying off debt, then go for it; however the pay off will come quicker if you forgo retirement savings for a short while.

[snshijuptr]

You will want to have both Roth and traditional retirement when it is time to begin pulling from your accounts, but you can never beat an employer match. There is no way that you can get immediate 100% or even 50% returns on your money without that match. And there is little chance that our taxes will ever get up to 50% for your normal retiree. So get your match, then send any leftover retirement money to your Roth. Then if you still want to contribute more, send more to your 401(k). I would just recommend you send anywhere between 15-25% of your income to retirement (not counting the match).

So for example, if you each earn $50,000:
You would
1) Put 3% ($1,500) in your 401(k) and get the match ($1,500)
2) Put 10% ($5,000) in your Roth IRA
3) Put 2% ($1,000) in your 401(k)
for a total of 5% of income ($2,500) in your 401(k) and 10% ($5,000) in your Roth IRA
Total yearly contributions with match: $9,000

Your girlfriend would
1) Put 6% ($3,000) in her 401(k) and get the match ($1,500)
2) Put 9% ($4,500) in her Roth IRA
for a total of 6% of income ($3,000) in her 401(k) and 9% ($4,500) in her Roth IRA
Total yearly contributions with match: $9,000

In addition, are you counting on each other's money for retirement? Any plans to marry in the very near future? If the answers are yes and no, then you should consider naming each other the beneficiary on your accounts.

[Slug]

Both of your 401k's will provide the same match. 100% of the first 3% equals a 3% match; 50% of the first 6% equals a 3% match.

What I recommend is to start by meeting the match. So put enough in your 401k to hit the employer match. Then invest in your Roth IRA up to the limit. Any additional retirement savings should be put into the 401k.

Remember that you are each allowed to invest $5,000 per year in the Roth IRA, assuming you are under the $150,000 annual household income limit.

This is your best bet.

To answer your question, technically, your GF's account is superior because it allows for a greater percentage of free cash flow for her. She only has to commit 3% of her salary to get the match while you have to commit 6% of yours. If salaries are equal, she has much more cashflow than you.

[thomsoad]

Slug is correct on his formula but he has them mixed up. Yours (3% match) allows more cash flow to invest in a Roth IRA.

[Slug]

Slug is correct on his formula but he has them mixed up. Yours (3% match) allows more cash flow to invest in a Roth IRA.

Yup, I switched BF and GF. BF has the best option. Good catch.

[BuckyBadger]

Wouldn't the respective salary make a difference? A 3% match on a 100k salary is better than a 3% match on a 50k salary -- although you are tying up more overall money by donating the 3% of 100k...