Author Topic: Get back into 401k?  (Read 779 times)

limitless

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Get back into 401k?
« on: March 04, 2017, 02:34:53 PM »
I stopped investing into my company 401k a couple months back. I was going up to the 6% company match. I stopped investing because I am concentrating on paying off debt. Though I am bothered because I am leaving roughly $300-$350/ month on the table not getting the match. Not to mention what I am not setting aside bugs me too. So, should I continue knocking out debt at a furious pace or get back into investing in the 401k up to the match? Thanks in advance for the advice.

the_gastropod

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Re: Get back into 401k?
« Reply #1 on: March 04, 2017, 02:42:41 PM »
What's the interest rate on your debt and how much debt do you have? If TOTAL_DEBT * (WEIGHTED_AVERAGE_INTEREST_RATE / 12) > $350, then you should prioritize paying off your debt. Otherwise, keep on cruising with the 401K contributions.

limitless

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Re: Get back into 401k?
« Reply #2 on: March 04, 2017, 03:39:43 PM »
Student Loan debt between the wife and I is about $26,000, 10k is about 6% and 16k is 2.75%. One Credit Card at $11,000 that is our main focus just transferred to a 0% interest card or 15 months. We'll have the cc paid off before then. Paying on average $1000 per month towards debt.

babybug

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Re: Get back into 401k?
« Reply #3 on: March 04, 2017, 07:53:56 PM »
Just looking at the high interest loan, 26k*.06/12 is just 130 a month interest. This goes down rapidly every month as you pay it down. So yes, I'd resume the 401k contribution up to the max.

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Viking Thor

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Re: Get back into 401k?
« Reply #4 on: March 04, 2017, 10:01:37 PM »
It is crazy not to contribute enough for the company match. You get an instant 100% return on investment. Unless your loan is an illegal loan from a gangster charging you some insane amount there is no loan that would make sense to pay before getting a company match.

MDM

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Re: Get back into 401k?
« Reply #5 on: March 04, 2017, 10:11:57 PM »
What's the interest rate on your debt and how much debt do you have? If TOTAL_DEBT * (WEIGHTED_AVERAGE_INTEREST_RATE / 12) > $350, then you should prioritize paying off your debt.
This can get fuzzy when comparing speculative market returns vs. specified loan interest rates.  No fuzziness here.

In this situation, the employer match (assuming it is 1-for-1) means a 100% return on each matched dollar put into the 401k.  Simply compare the 100% rate to any loan interest rate and put the money toward the one with the higher rate.  The total amount of debt (assuming one can afford the minimum payment) is irrelevant for this purpose.

kpd905

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Re: Get back into 401k?
« Reply #6 on: March 05, 2017, 06:29:30 AM »
If the debt has an interest rate lower than 100%, invest in the 401k up to the match.
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Mezzie

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Re: Get back into 401k?
« Reply #7 on: March 05, 2017, 08:42:21 AM »
I abhor debt, and even I would contribute up to the company match before paying off debt. Give up something else to accelerate your paydown.
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limitless

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Re: Get back into 401k?
« Reply #8 on: March 05, 2017, 11:08:53 AM »
Thank you to all that replied. I had the same thoughts on the 100% return because yes it is a dollar for dollar match up to 6%. Again thank you all. I will be back in it come next payday.

limitless

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Re: Get back into 401k?
« Reply #9 on: March 19, 2017, 01:03:48 AM »
Back into the 401k as of Friday at $672/ mo. Half contributed by employer. Thanks for the advice. $218 less for the month spendable income. I would say that is a good trade.

PDXTabs

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Re: Get back into 401k?
« Reply #10 on: March 19, 2017, 08:39:43 AM »
Back into the 401k as of Friday at $672/ mo. Half contributed by employer. Thanks for the advice. $218 less for the month spendable income. I would say that is a good trade.

I would make sure to put enough in to get your 6% match for the year.

limitless

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Re: Get back into 401k?
« Reply #11 on: March 20, 2017, 08:21:36 PM »

I would make sure to put enough in to get your 6% match for the year.
[/quote]

I put in the full 6% each month, is there a way to make up for the last 2.5 months I was not in it? I didn't even think about this.

ZiziPB

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Re: Get back into 401k?
« Reply #12 on: March 21, 2017, 04:20:08 AM »

I would make sure to put enough in to get your 6% match for the year.

I put in the full 6% each month, is there a way to make up for the last 2.5 months I was not in it? I didn't even think about this.
[/quote]
Only if your employer match has some type of a true up feature.  If it doesn't (most don't), there is nothing you can do.  Check your summary plan description.



NorthernBlitz

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Re: Get back into 401k?
« Reply #13 on: March 21, 2017, 04:28:15 AM »
It is crazy not to contribute enough for the company match. You get an instant 100% return on investment. Unless your loan is an illegal loan from a gangster charging you some insane amount there is no loan that would make sense to pay before getting a company match.

This.