401k match question

[corn18]

This has my brain hurting. My company used to do a 100% match to 5% and then 50% between 5% and 7%. So I set my contribution to 7% to max the match. I usually hit the IRS ceiling for my contributions (pre-match) in about August.

My company changed to a 100% match up to 5% but I left my contribution at 7%. I am trying to figure out if I should lower my contribution to 5% to maximize my company match. But for some reason my brain cannot figure out the math to see if this is correct.

I would still max out my IRS limit of $17,500 if I dropped to 5%. But it seems that I could get more match if I put in @ 5% vs. 7% because I am wasting the extra 2% by not getting that matched.

Please help.

Tom

[disneysteve]

You are correct. You should lower it to 5%. It will take you longer to max out the contributions but more of your contributions will be subject to the match.

[BuckyBadger]

Unless your company does a "true-up" at the end of the year - in which case it doesn't matter.

Some companies choose to not punish their employees for maxing out a 401k/403b early by truing up the match at the end of the year. If your match is trued up it doesn't matter how fast you max out you will still get the full match.

[corn18]

Mine does not true up. That would be nice.

[kv968]

What are you planning on doing with the extra 2%?

[corn18]

What are you planning on doing with the extra 2%?

Not sure what you mean. I will contribute $17,500 with either plan. It's just the total match that changes and that goes into the 401k.

All of it is OBE as I got a note from HR saying they stop matching after $260k of salary. That means I have to withhold 7% to get $17,500 into the account before they stop matching. I guess I could withhold at 5% and they'll stop matching at $260k and I keep contributing until $350k without a match. Works out the same either way I guess.

I love the little rules they put in that dilute benefits.

Tom

[feh]

You are correct. You should lower it to 5%. It will take you longer to max out the contributions but more of your contributions will be subject to the match.

Yup. Have the company match your contributions for as many paychecks as possible.

[BuckyBadger]

Mine does not true up. That would be nice.

In this case, I agree with Steve and others. Spread out your contributions to maximize your match.

It's a shame about truing up...

[corn18]

They stop matching AND stop my contributions when I hit $260,000 income regardless of how much I have contributed. So, the math says I have to hit $17,500 contributed right when I hit $260,000 income.

$17,500 / $260,000 = 6.73%

They limit me to even percentages, so I have to stay at 7%.

If I get to $260,000 income and have not contributed $17,500, I am SOL. They won't add any more. Sucks.

Tom