Personal finance - 401k - question

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So, what do u guys think about this? I'm not too familiar with all this so I just want to get an idea of how good a deal this is:


I'm going to work for for an employer and this is what they're offering me:

401k that the employer contributes 3% of my salary and I can put up to 15K this year.

thoughts???

 

[xiphoid2010]

So, what do u guys think about this? I'm not too familiar with all this so I just want to get an idea of how good a deal this is:


I'm going to work for for an employer and this is what they're offering me:

401k that the employer contributes 3% of my salary and I can put up to 15K this year.

thoughts???

3% is a bit on the low side, at least in my experience -- match dollar for dollar on the first 3%, then 50% on the dollar for the next 3% is pretty standard. Meaning, If you make $100K, can contribute 15% ($15K), then the company match (100% x $3K) + (50% x $3k) = $4.5K.

In your case, it sounds like they are only matching the first 3% ($3K) instead. It's up to you. $1.5K difference is no pocket change, but it's not a big amount either.

 

[nnguyenc]

i smell CVS

 

[Old Timer]

i smell CVS

That would be wrong young grasshopper.....

 

[WVUPharm2007]

My poor-ass rural hospital on financial life support gives me 5%...

 

[confettiflyer]

$15k a year max is the max for everyone in the country (sans you old fogies who get the catch up provision), so don't feel special there.

Just to clarify, is the company straight up depositing 3% of your salary into a 401k? Or is the company matching 3% of your salary.

Either way, this deal kind of sucks. If it's the former and you make $100k, that's only $3k deposited into your account. If it's the latter, you get $3k only after you put in $3k. The average is 6% of salary and 1:1 matching.

 

[ilostmyspacebar]

it's not clear...it just says "we contribute 3% of your salary".....it's 4 weeks paid vacation and a week is added after 2 years as well as a salary bump. it was also mentioned that i get insurance for me and my family with no premiums coming out of my check.

 

[confettiflyer]

it's not clear...it just says "we contribute 3% of your salary".....it's 4 weeks paid vacation and a week is added after 2 years as well as a salary bump. it was also mentioned that i get insurance for me and my family with no premiums coming out of my check.

wow no premium insurance? that's a good deal (unless the insurance sucks).

4 weeks paid vacation? That's pretty good too.

This sounds like a government position with that new FERS thing that was discussed in the VA thread.

 

[medicalCPA]

I don't know 401(k)'s much, but it seems like this one is not a good deal.

But even if we said how good or sucky the 401(k) is, I would hope you're not basing your choice of employer based on how much they match your 401(k) for you.

 

[charfdorn]

it's not clear...it just says "we contribute 3% of your salary".....it's 4 weeks paid vacation and a week is added after 2 years as well as a salary bump. it was also mentioned that i get insurance for me and my family with no premiums coming out of my check.

This part is a good deal. The 401(k) matching is not. I don't know what the industry is like (I work in the hospitality industry right now) but I would kill for beni's like that.

My company just suspended its 401(k) matching program because of the recession. Sux. I'd be surprised if it comes back even after the economy rebounds. I would try to put the full 15k in, with whatever matching you can get, because family medical coverage with no premiums is SWEET. Especially if you have a big family.

 

[dumediat]

But even if we said how good or sucky the 401(k) is, I would hope you're not basing your choice of employer based on how much they match your 401(k) for you.

Why not? Granted, it shouldn't be the only thing you base your opinion on, but it's still really important. I'd much rather take a position where the company matches the first 6% and offers above-average benefits than one that matches 3% and offers great benefits. This is especially true during a struggling economy, since many of the stocks that will be in your portfolio will be acquired at a low price.

 

[pillpusher2007]

I put 12% in. My hospital does not match at all(I know awesome😡). Even if your young and fresh out of school make SURE you put in at least 10% or make that be after your match. Youll be happy when your older!

 

[ilostmyspacebar]

what if it is a crappy 401k but supplementing it with an IRA?

 

[OTFuturePharmD]

The advise I was always given was to put up to the percentage that will be matched in the 401k and the rest in a Roth IRA. Less taxes you have to pay in the end. Of course, I am still not a fan of 401ks since the past financial crashes. Never put all $$ in one basket is a good rule.

 

[confettiflyer]

what if it is a crappy 401k but supplementing it with an IRA?

They recommend doing that, but still... a crappy 401k = more money you'll have to shell out to "make up" for that deficiency vs. someone at another workplace getting a better 401k deal.

You gotta weigh it all together, salary + benefit package.

 

[loveyoursmile]

So, what do u guys think about this? I'm not too familiar with all this so I just want to get an idea of how good a deal this is:


I'm going to work for for an employer and this is what they're offering me:

401k that the employer contributes 3% of my salary and I can put up to 15K this year.

thoughts???

I've been working in high tech company and i can share something


Total possible 401k contribution/year = your contribution + company contribution = 15K

Since it doesn't say clearly, 2 possible scenarios
1) You have to contribute and company will match up to 3%
For example:
You make 100k/year, you only contribute 2% (2K), then company of only match 2%, total you have 4K in your 401k.
You make 100k/year, you contribute 5% (5K), then company of match max 3%, total you have 8K in your 401k.
2) Company will always contribute 3% to your 401K no matter whether you make your own contribution or not. And the most you can contribute is additional 12% to get the total of 15K/year

Hope this help

-lys

 

[Old Timer]

I've been working in high tech company and i can share something


Total possible 401k contribution/year = your contribution + company contribution = 15K

Since it doesn't say clearly, 2 possible scenarios
1) You have to contribute and company will match up to 3%
For example:
You make 100k/year, you only contribute 2% (2K), then company of only match 2%, total you have 4K in your 401k.
You make 100k/year, you contribute 5% (5K), then company of match max 3%, total you have 8K in your 401k.
2) Company will always contribute 3% to your 401K no matter whether you make your own contribution or not. And the most you can contribute is additional 12% to get the total of 15K/year

Hope this help

-lys

This is seriously wrong on so many levels.

• Each 401K is it's own distinct plan with it's own rules.
• The maximum contribution a tax payer can make is the max allowed by the plan or by the Federal Government whichever is lower.
• The Federal limit is reset each year and was $15,500 in 2008 and $16,500 in 2009.
• The max is further complicated if you are over 50 and have not contributed the max in previous years. There are options for catch up contributions if the plan allows. The max is $5,000.00 per year. So lets say you are a 51 year old pharmacist who makes $140,000.00 per year and your plan matches the first 5%. You can max out at $28,500.00 for 2009. $16,500 from you,+$7,000.00 from your employer+$5,000.00 make up from previous years.
• The employers contribution DOES NOT count in the maximum allowed contribution.
• Plans are not required to contribute if the employee does not contribute. Plans are not required to match any amount and they can change the match at any time.

 

[loveyoursmile]

This is seriously wrong on so many levels.

• Each 401K is it's own distinct plan with it's own rules.
• The maximum contribution a tax payer can make is the max allowed by the plan or by the Federal Government whichever is lower.
• The Federal limit is reset each year and was $15,500 in 2008 and $16,500 in 2009.
• The max is further complicated if you are over 50 and have not contributed the max in previous years. There are options for catch up contributions if the plan allows. The max is $5,000.00 per year. So lets say you are a 51 year old pharmacist who makes $140,000.00 per year and your plan matches the first 5%. You can max out at $28,500.00 for 2009. $16,500 from you,+$7,000.00 from your employer+$5,000.00 make up from previous years.
• The employers contribution DOES NOT count in the maximum allowed contribution.
• Plans are not required to contribute if the employee does not contribute. Plans are not required to match any amount and they can change the match at any time.

I would disagree if you say there is serious wrong conception about my post. i agree with you on the limit of 15.5k and the catchup up contribution. And i've just learned that at Walgreen starting this year, company contribution won't count toward IRS limit. So, it is totally depend on the plan. I gave a general concept, and i believe it still hold some valid points

-lys

 

[Old Timer]

I would disagree if you say there is serious wrong conception about my post. i agree with you on the limit of 15.5k and the catchup up contribution. And i've just learned that at Walgreen starting this year, company contribution won't count toward IRS limit. So, it is totally depend on the plan. I gave a general concept, and i believe it still hold some valid points

-lys

Not really, you continue to misunderstand the entire concept. It's U.S. Federal Law that determines what will and will not count towards what is shielded from Federal Income Tax. This has no bearing on what the plan's parameters are. Neither Walgreens nor any other US corporation can tell the IRS what is and what is not taxable. You fail to understand the basic concept.

 

[confettiflyer]

As much of a curmudgeon Old Timer is, he is 100% correct in this matter.

Any small mistake in the assumption of your 401k (and other retirement plans) can have serious tax implications now and upon retirement. If you're completely clueless or are having trouble deciphering your company's literature, consult someone who is well versed in these types of things (financial planner, CPA, etc...) and has a fiduciary responsibility to you.

 

[The Sonoran]

A good rule of thumb that I use is to contribute to a 401k (403b, 457, TSP) up to the max being matched. If you have a TSP plan, contribute the maximum allowed. All of their funds are VERY low-fee funds, regardless of your asset allocation choices.

If you have a high fee, crappy fund choices, 401k (or similar) plan, it may be better to fully fund a Roth IRA instead. However, most pharmacists make too much money to qualify for a Roth.

So, to sidestep this problem temporarily, contribute the max to a non-deductible IRA. In 2010, the income cap will be removed for anyone who wants to convert their traditional IRA into a Roth IRA, and any tax consequences (for deductible IRAs) can be spread over 2010 and 2011.

Then determine (cost wise and fund choice wise) if it is better for you to go back and max out your 401k, or to invest in an after-tax, low fee fund offered through companies like The Vanguard Group.

If you're someone who changes job often, it may be wiser to max out the "after-match" 401k plan in a MM Fund (or similar) in anticipation that you will rollover your 401k plan to a fund family (e.g. Vanguard) of your choice.

Of course, this is just a general rule of thumb. Everyone's personal situation is different. BUT, you don't need to spend money hiring an adviser. If you're smart enough to get through pharmacy school, then you're smart enough to figure out how to effectively manage your own money.

If you need someone to point you in the right direction, stop by my financial blog.

http://guzzothecontrarian.com

 

[Markovnikov]

I work at a place that matches $ for $ up to 4%. I contribute 4%.

You get to pick what funds you want your money to go in. I allocated 10% to each of the ten funds, so I am diversified and "not putting all my eggs in one basket".

The employer matches my contributions so I automatically double my money. The only drag is that the stock market makes your 401k go down in value because it is so shaky right now.