My employer matches 25% of the first 2% of my salary for the company 401k. However, there is a schedule for years of service that determine vesting in the employer contributions.
1 Year: 20% vested
2 Years: 40% vested
3 Years: 60% vested
4 Years: 80% vested
5 Years: 100% vested
I am approaching one year employment in about 6 weeks. I have not yet contributed to this plan in favor of paying off student loans to this point (still about $31k left there ranging 5.16%-6.55% depending on loan). I plan on staying with this company for at least 2 years.
Do you think it would be advantageous for me to contribute up to the matching 2% figure even with this vesting schedule? By my calculation, if I stay at least two years I could have "free" 10% return (25% match and 40% of the total vested... .25*.4). It isn't that amazing, but it may still beat the alternative of strictly paying off student loans.
I am leaning toward it being worth it because I will also get to deduct those contributions too (I am in the 25% marginal tax bracket). Otherwise, I would focus on student loans with the rest of my non-consumer spending. I have thought about making traditional IRA contributions too to the $5500 limit to get that tax deduction.
I can save $32-34k in 2016 in total, so it would roughly break down as $1360 to 401k , $5500 to traditional IRA, and the remaining $25-27k at student loans.
Any input? Good plan? Bad? Thanks!