I just started a new job, and they said their 401k match is 2:1 (2 dollars to every dollar I put in), up to 4,000 dollars per quarter. So up to 16000 a year. That seems insane right? Are there any gotchas I should be asking about or possibly missing?
New company 401k match seems insanely good, am I missing anything?
byu/SheSoldSeaShells8008 inpersonalfinance
Posted by SheSoldSeaShells8008
26 Comments
Is there a vesting period, i.e. the match only becomes yours after three years of employment, or does it vest immediately?
Is there a vesting period?
When does it vest? Do you have to space your contributions over 4Qs or does it true up? ie if you contribute $8k in Q1, would you get $16K or only $4k.
Seeing the other posts I’m inclined to ask: is there a vesting period?
Wow this is amazing. Haven’t seen this match before. I’d ask about the vesting schedule for the employer match. Most of companies set vesting at 3 years but I have seen some companies match vest immediately
That sounds fantastic! Ask them about Vesting. Meaning, is the amount they match automatically yours, or could you lose it if you leave the company before a certain amount of time (sometimes 3 years).
My company works the same way. It’s not unheard of. Vests immediately.
Just read through the plan and check to see if you are missing anything. The company should provide the plan to you on an HR website or something similar. Often they will have a summary plan description with all the key points and a full plan with the fine print.
Thanks for all of the quick responses, from what I understand, it vests immediately. I will make sure to double check though, thanks for pointing that out everyone!
The main gotcha would be a long vesting period. IE, the match would not legally be “yours” until enough time passed. For example, if the vesting period were 5 years, and you leave after 3, you might lose every dollar of match and associated gains you had gotten over the 3 years.
Assuming you stick around for the vesting period, though, a 2x match up to 16k is utterly amazing.
1) As others have said, the vesting period may be extreme and is the real decider.
2) it would be 12,000 not 16,000
3) That’s an unbelievable high matching rate. So high, I’d sooner believe its incorrect, and it’s actually a more common 50% matching.
When is the matching money deposited? Every paycheck? Or is it at the end of the fiscal year?
I had a job that matched 1:1 for 5% and then gave an extra profit share on top of 4.5%. It’s not as uncommon as you think.
200% match is rare nowadays but it does happen. Absolutely max it out.
I don’t think anyone has asked this yet, but could there … be a vesting period??
My company just took away matching 401K contributions so this is a kick in the nuts. Congrats to you and it’s abundantly clear that I need a new job.
As everyone has said, vesting may be “the catch”. That said, it’s not a big risk because your contributions are always “vested”, it is the match you could lose if you don’t become vested
Mine matches equal amount 1 for 1… i put in and I max it out every year as does my wife… we basically get 80k per year between us socked into 401k.
If it vests immediately, the only other big thing I’d want to be careful of is maxing it too fast. The limit of 4k per quarter is unusual, so just make sure that if you’re on track to max it, you don’t max it in october or november or something and end up missing out on some of that awesome match.
Congrats on the awesome 401k!
UHG just reduced their match to 3.5% from 4.5%. Anything over 5% is outrageous, I never saw numbers higher than 5%.
My company matches 5%, and for the last 30 years they had this profit sharing plan where they add another 10% match on top, so we all basically get a 15% match. I know many employees who have been there for a long time talk about how they have a few millions in there 401k accounts.
It’s possible that the company has previously failed their equity testing for their 401k plan, and creating this insane match is their response to make sure it doesn’t happen again.
The testing checks if enough low earners, those that make under $160k this year I think, contribute enough money to the plan to show that’s fairly administered to everyone. If the plan overly favors high earners, then high earners aren’t allowed to contribute the full annual max. That annoys those high earners, usually executives, so they are usually motivated to fix it.
I hope the gig works for you and you get a decent career with them because this is both a stellar and incredibly rare offer. I worked at 3 different fortune companies with over 100k employees and never got more than a 3% match. After decades it amounted to just about a year’s living expenses in retirement.
mine matches 2:1 up to 5% and vests after 3 years. I think newer hires is 1:1 up to 10%. still better than a sharp stick in the eye.
You do know you can read the company policy right. This would be on your brokerage’s website once you log in.
Yea I’m going out on a limb and you are going to be very disappointed. Either you work to the most generous company on the planet or there is a cap you are not aware of. I think the best match you’ll find is about $5k on max contributions.
It’s possible they match 2-1 but likely a cap.
This may be a different take on the 2:1 match – good if you’re more junior or paid $267,000 or less in a similar scenario getting a 6% company match.
Not great if you’re more senior and the 6% match of your salary would exceed the $16,000 a year limit to the companies match. If it’s a high paying job – you may get a better retirment benefits from other companies. In that scenario you could use competitors better retirement benefits to negotiate a higher base salary to make up for not getting a match over the 16k.
2:1 match is great especially if young. Most major company’s have 4-5 year vesting schedules for the match – so thats just kinda it is what it is. Bad if it’s a vesting cliff where 100% vests at 3 years and you don’t plan to be in the position that long and get 0% match.
Personally, I treat the match and anything that vests as gravy – but I’m not relying on it for my retirement planning, staying in a lower paying role, or stalling my career for 401k to fully vest.
You can always negotiate with your new company some higher salary, one time bonus, equity, etc to make you whole because you’re leaving xyz unvested and the new company understands taking the new role shouldn’t cost you $$$. If they want the best talent they’ll take care of you.