Author Topic: Would you Skip Your Employer Match Once You've Won The Game?  (Read 1378 times)

heybro

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[Read this thread with the context that it is very difficult for me to spend money -- my biggest risk is having too much.  I will have to force myself to spend at some point.]

If anyone ever finds themselves working while in FIRE, would you stop funding your employer plan and therefore skip your employer match?  I am currently putting most of my pay-check in retirement accounts and will soon start working part-time.  I will not need to contribute anything else in to my retirement accounts because of the magic of time and compounding.  Also, my expenses are very low.  Therefore, why add in more in to those accounts when I don't need it? 
It seems completely insane to walk away from free retirement money but at that point in my life, it would be better for me to have a little extra on the paycheck and force myself to spend it now instead of locking it up in accounts I can't touch until I'm 65 and will not need that extra money then.

Would anyone skip the free money once you've won the game?

MonkeyJenga

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #1 on: July 08, 2019, 01:09:48 AM »
You can access your money before 65. What sorts of things do you want to force yourself to spend money on? How much do you have in taxable accounts?

LilyFleur

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #2 on: July 08, 2019, 02:41:31 AM »
I would not skip it because of two reasons:  I am self-insuring for nursing care and that cost is a big unknown, and because I have two children as beneficiaries on my 401k. Why would I let the corporation keep part of my compensation instead of leaving it to my children?

reeshau

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #3 on: July 08, 2019, 02:53:22 AM »
What is your company match?

Let me illustrate with a hypothetical situation:

Company match: 50%
Tax bracket: 22%

401k deposit: $100

With match:
Company match: $50
immediate withdrawal: $150
taxes:  (22% + 10% penalty) $48
total:  $102

Without match:
income: $100
taxes: $22
total: $78

So, you are still $24 ahead, even if you were dumb enough to just straight up pull the money out and blow it.  But as @MonkeyJenga says, there are ways to improve on this significantly.
« Last Edit: July 08, 2019, 06:29:04 AM by reeshau »

FIREstache

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #4 on: July 08, 2019, 05:19:45 AM »

I don't spend a lot of money, have a very high savings rate, and have more than I need in my stash to FIRE today, but I wouldn't give up the match.  In fact, I've increased my retirement plan contributions over the last year and a half and will crank them up even higher in the final months.


less4success

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #6 on: July 08, 2019, 08:10:28 AM »
I’ve heard that money in a 401k is better protected from creditors/judgments, so that is one more reason to put money in the 401k.

Tuskalusa

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #7 on: July 08, 2019, 08:14:57 AM »
I’d invest up to the match just to unlock that “free money” that is part of my compensation. However, I wouldn’t feel compelled to max out my 401k anymore.

Mr. Green

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #8 on: July 08, 2019, 09:25:29 AM »
Would I ever pass up free money?

No.

techwiz

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #9 on: July 08, 2019, 09:28:55 AM »
Would I ever pass up free money?

No.

Ditto

MrThatsDifferent

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #10 on: July 08, 2019, 09:47:32 AM »
How weird, you say you barely spend money but you’re willing to sacrifice free money so you have more in your pocket to do what with, still not spend it? I’m not sure what game you’re playing, and I’m not seeing how you’re winning if it’s making you behave arrogantly and paranoid at the same time.

Catbert

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erutio

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #13 on: July 08, 2019, 11:36:13 AM »
It would be incredibly asinine.  You usually get more money in your pocket anyways, if you contribute for the employer match and then take the penalty + taxes to withdraw the money.

terran

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #14 on: July 08, 2019, 11:48:47 AM »
Yes, I would skip the match. And the salary. And the work. However, if I chose to continue to work I would absolutely contribute enough to get the match. That's an instant 100% return on your investment, which you can't get anywhere else. Even if you sell other investments to spend while you contribute to the workplace plan for the match you'll still be ahead.

heybro

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #15 on: July 09, 2019, 07:43:05 PM »
What is your company match?

Let me illustrate with a hypothetical situation:

Company match: 50%
Tax bracket: 22%

401k deposit: $100

With match:
Company match: $50
immediate withdrawal: $150
taxes:  (22% + 10% penalty) $48
total:  $102

Without match:
income: $100
taxes: $22
total: $78

So, you are still $24 ahead, even if you were dumb enough to just straight up pull the money out and blow it.  But as @MonkeyJenga says, there are ways to improve on this significantly.

Most helpful post.  Thank you!

The concept of "enough" is a tough one.  There is always something that says "get more" so this is a good way of demonstrating the pros to it.  I don't want to fall in to the "one more year" syndrome.

heybro

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #16 on: July 09, 2019, 08:07:46 PM »

RWD

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #17 on: July 09, 2019, 08:18:36 PM »
https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Show me a way that does not require leaving your employer.  I'd like to stay with my current employer part-time.

I don't think SEPP 72(t) requires leaving your employer. The Roth IRA conversion ladder should also work if your employer allows in-service rollovers.

FatFI2025

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #18 on: July 10, 2019, 07:32:18 AM »
https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Show me a way that does not require leaving your employer.  I'd like to stay with my current employer part-time.

I don't think SEPP 72(t) requires leaving your employer. The Roth IRA conversion ladder should also work if your employer allows in-service rollovers.

Most employer plans aren't going to let you withdrawal until you separate. And most employers don't contribute if you're part time anyway.

But even if you had $5M in your traditional 401k at 60 it would still make sense to shift your contributions to a Roth 401k and get the company match in the trad 401k. You might eventually get hit with a 40% tax on your RMDs but you still end up significantly ahead with the match.

Giving up the match is the same as giving up your salary. Would you skip your employer salary once you've won the game?

Huskie87

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #19 on: July 10, 2019, 07:48:23 AM »
No.  You might as well ask for an additional pay cut too.

catccc

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #20 on: July 10, 2019, 09:08:54 AM »
This.  Also, contributing will soften the current year tax bite.

Would I ever pass up free money?

No.

acepedro45

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #21 on: July 10, 2019, 09:36:27 AM »
Call out: some of the responses on this thread are not a good reflection of this community.

The OP asked a legitimate question - but I guess a few people considered it too basic for their tastes. Answers like @reeshau gave that lay out some math and help the OP are good. Someone called the OP arrogant and paranoid. Some others said they didn't like passing up free money but didn't directly address the OP's question.

That disappoints me. Let's try to play nice.

Villanelle

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Re: Would you Skip Your Employer Match Once You've Won The Game?
« Reply #22 on: July 10, 2019, 09:50:34 AM »
If you are going to keep working and you have [more than] enough to meet your regular needs, why on earth would you consider yourself better off having access to more money now--money you admit you don't need and don't want to spend? 

Now, if you are young and going to part time but that won't cover all your expenses and you have absolutely no money in accounts you can access before traditional retirement age, you do have a bit more of a legitimate concern, but I'd first look at a conversion ladder and the other options to see if that would be sufficient, or sufficient by the time you actually quite working entirely.