Employer Sponsored 401(k)

[ea1776]

Do employer matches count against the 13.5k (CORRECTION: 15.5k) limit on annual 401(k) contributions?

[disneysteve]

No. The limit, which is 15.5K by the way, is the amount you are allowed to contribute. What your employer adds is extra.

[cooliemae]

A hint, though it may not apply to many people. If you can max out your 401k contributions over the course of the year, make sure that your 401k contributions are spaced out so that you don't lose any of the matching.

Example: Over 26 pay periods, employee A wants to put away $600 per paycheck into their 401k with the employer matching the first $300.

At this rate employee A will reach their contribution limit in pay period 23, which would cost them $900 in employer matching contributions.

Employee B puts $519 away each pay period, therefore gaining the extra $900 in employer matching contributions.

[ea1776]

A hint, though it may not apply to many people. If you can max out your 401k contributions over the course of the year, make sure that your 401k contributions are spaced out so that you don't lose any of the matching.

Example: Over 26 pay periods, employee A wants to put away $600 per paycheck into their 401k with the employer matching the first $300.

At this rate employee A will reach their contribution limit in pay period 23, which would cost them $900 in employer matching contributions.

Employee B puts $519 away each pay period, therefore gaining the extra $900 in employer matching contributions.

Right that is a good point. And then on the last paycheck, max it out.

I was thinking about that the other day, when I heard some people around here talking about maxing out their 401(k) NOW in an effort to time the market and buy low. Clearly, that's a bad strategy for the example you mention.

[ea1776]

No. The limit, which is 15.5K by the way, is the amount you are allowed to contribute. What your employer adds is extra.

Oops. Okay thanks Steve.