My company did not provide a lot of information about its 401k when I was hired, but when I became eligible recently I enrolled. I have been able to learn a few things about it that I didn't know before. FYI I'm paid hourly, and my pay averages out to right around $35,000 a year. I currently contribute 10% every week.
First off, there is no guaranteed company match. Whatever percentage of my pay that I put in, that's all that is guaranteed to go in. However what my company does is, at two points during the year, offer one time lump sums. They are a profit sharing lump sum, and a "scrap bonus" lump sum. The profit sharing is ONLY given out to employees with a 401k, and it is automatically deposited. The scrap bonus can either be paid out as a regular bonus (with the accompanying tax), or deposited into the 401k. The scrap bonus is paid out in December. I already signed off on having the scrap bonus deposited. Now I am waiting for the profit sharing at the beginning of next year (I believe March). These bonuses are not a lot of money. The scrap bonus this year is around $750, the profit sharing is generally around $2000. And, as is the nature of the beast, the profit sharing is not guaranteed. If the company doesn't do well, we obviously don't get a profit sharing bonuses. However I am not too worried as employees who I have talked to say the company has basically never failed to pay out a profit sharing bonus. The company is doing very well right now, and is an industry leader in sales and is still expanding.
So, I guess the question is, is this 401k actually worth investing a significant amount of my pay into? Obviously, at this point I will keep the account open no matter what, as just having the 401k entitles me to my cut of the profit sharing. But since there is no employee match on my weekly contribution, does it make more sense to cut back on 401k contributions and get my new Roth IRA maxed out first, or even look at putting more post-tax money into a taxable investment account? In addition, this job is not my career. It's an entry level position that I am working at as I finish my last semester of college. I will be applying elsewhere and moving on (most likely within 6-12 months), at which point I will rollover this account into an IRA or leave as-is for a while, or whatever makes the most sense at the time.
My initial thought was, yes, it's worth it. It's a tax advantaged account, I have the option of (and put all my contribution into) investing in the Vanguard Institutional Index Fund with its .04% expense ratio, and Personal Capital/BrightScope says the 401k fees are reasonable (less than the industry average apparently). But I just can't shake the feeling that without that company match, I might as well be putting the money towards maxing out my Roth IRA first, and then just collect the two upcoming "bonuses". And then take the rest of my money and put it into my taxable account and savings for eventual move/future house/etc, and worry about a fully funded 401k when I get into my career. If it matters, my grown up career will involve working in law enforcement and eventually collecting a pension.
Hopefully I've done a good job of explaining. Ultimately, I guess what I'm looking for is someone to either point out reasons why it's *obviously* worth it to contribute to that 401k while I'm still employed here, or reasons why I *obviously* shouldn't worry about putting extra money into that 401k right now, as the other options make more sense for me. Or maybe I'm just venting because this is the first job I've had that doesn't offer a true 401k match, and it frustrates me, hah.
