The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Spectra on February 25, 2014, 11:58:29 AM
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I joined a new company last year and find it odd that the 401K match isn't a match at all. Every year the directors determine an amount to deposit for you into a 401K irregardless to you depositing anything.
At the moment I am maxing out 2 Roth-IRA's and paying off the house while investing in Vanguard funds for my savings account. The only reason I would invest in the 401K would be to take advantage of the tax deduction once my IRA's are maxed.
Any other reasons someone would contribute?
Also Why would the company take this route over the traditional matching?
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Matching contributions result in a little less predictability/control when it comes to compensation expense. If you can determine the plan type your employer offers, it might provide some insight into their decision.
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/401%28k%29-Resource-Guide-Plan-Sponsors-401%28k%29-Plan-Overview
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MODERATOR NOTE: Off topic discussion of the word "irregardless" was split off to here: https://forum.mrmoneymustache.com/off-topic/discussion-about-the-word/
Some minor discussion of this 401k topic was intermixed, but impossible to keep t hat content in one thread and the other in the other thread.
Please keep this on topic.
Thanks!
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1) Tax deduction benefits and lowering one's marginal tax rate (a great way to maximize Roth contributions) are the main benefits of a 401(k). Also, tax-deferred growth.
2) Some companies are generous, some prefer regular accounting with regular 401(k) contributions on their part, some both. Requiring employee contributions is not something employer have to do. (I can't think of any other reasons at the moment.)