Author Topic: 401K Sucks at New Job. What to do?  (Read 4512 times)

ichangedmyname

  • Bristles
  • ***
  • Posts: 420
    • Luxe Frugality
401K Sucks at New Job. What to do?
« on: December 25, 2014, 08:27:37 PM »
I got a new job and while the insurance is great the 401k is horrible. It's not fully vested until 5 years and on top of that the match is 25% of up to 6% I contribute. It's so horrible but I still have to do it, right?

Make the best of it?

4alpacas

  • Handlebar Stache
  • *****
  • Posts: 1898
Re: 401K Sucks at New Job. What to do?
« Reply #1 on: December 25, 2014, 08:31:58 PM »
I got a new job and while the insurance is great the 401k is horrible. It's not fully vested until 5 years and on top of that the match is 25% of up to 6% I contribute. It's so horrible but I still have to do it, right?

Make the best of it?
For me, the best part of the 401k is the tax break.  :)  The match is just a bonus.

Hey It's Me

  • Pencil Stache
  • ****
  • Posts: 717
    • Moe's Journal
Re: 401K Sucks at New Job. What to do?
« Reply #2 on: December 25, 2014, 11:16:03 PM »
There is no free money in business.

+1

RecoveringCarClown

  • Stubble
  • **
  • Posts: 125
  • Location: Northwest
Re: 401K Sucks at New Job. What to do?
« Reply #3 on: December 26, 2014, 12:18:22 AM »
18k off your AGI next year, even though I had zero match until recently, I take full advantage Every_Year.

Monkey Uncle

  • Handlebar Stache
  • *****
  • Posts: 1536
  • Location: West-by-god-Virginia
Re: 401K Sucks at New Job. What to do?
« Reply #4 on: December 26, 2014, 04:36:34 AM »
The key question you should consider: How long do you plan to stay at this job?  If you're not going to stay long enough for the employer contributions to vest, then you'll need to think about a) how much partially vested money will you take with you when you leave? b) is the total of your contributions plus the portion of vested match you get more than you would have if you funded an IRA instead?  My guess is the 401k would win because of the higher contribution limit, but you need to do the math for your personal situation.  Of course, you could max out both if you can afford to live on what's left. In which case you have to do the 401k.

If you're going to stay longer than 5 years, then it's a no-brainer.  You can't leave an instant 25% return sitting on the table.  It may not be free money, but it's money you're not going to get if you don't participate.

TheThirstyStag

  • Bristles
  • ***
  • Posts: 301
Re: 401K Sucks at New Job. What to do?
« Reply #5 on: December 26, 2014, 08:45:35 AM »
I strongly dislike the use of the term "free money" being used to describe 401(k) matches.

It is not free money. It is part of the compensation you receive for your services rendered to the company.

If the company cut the match, you would be receiving less money for your services. It is no different from if they cut your base salary.

The use of the term "free money" in reference to 401(k) matches encourages a certain mindset where a job is viewed as a "gift" and an employer as a source of charity, generously giving you money. That mindset will lead to you being underpaid and taken advantage of. There is no free money in business.

Well said.  Very well said.

beeth_oven

  • 5 O'Clock Shadow
  • *
  • Posts: 39
Re: 401K Sucks at New Job. What to do?
« Reply #6 on: December 26, 2014, 07:51:17 PM »
Hmm, do you work as the same place as me? Because I went through this about 6 months ago; same match and all and had the same quandary as you. I decided to contribute for the tax breaks. You should check to see what kinds of funds are available first. If they're high fee, or otherwise, sucky, might want to contribute just enough for the tax break, then focus the rest on after-tax investments.

ichangedmyname

  • Bristles
  • ***
  • Posts: 420
    • Luxe Frugality
Re: 401K Sucks at New Job. What to do?
« Reply #7 on: December 27, 2014, 12:23:39 AM »
I don't know if I plan to stay there long. I just really needed a job and they offered me a supervisor position so I took it. I do have an IRA and I should probably just contribute there. I'm not earning that much at this place 28k/yr if I contributed 6% they'll match $432 for the year.

Good point on looking at the funds first. I'm only 30 days in so 401k doesn't kick in for 2 more months. I know it's with Prudential. I need to research.