Help with Employer 401k matching math

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
stocknoob4111
Posts: 3509
Joined: Sun Jan 07, 2018 11:52 am

Help with Employer 401k matching math

Post by stocknoob4111 »

To date i've contributed $12,789.51 to my 401k. Each paycheck I contribute $765.15 and my employer pitches in $218.62. I have 11 more pay periods remaining this year. Doing some rough math it looks like at the current rate I will hit my 401k contrib limit with my Dec 3 paycheck.

-------------12789.51
13-Aug-21----765.15
27-Aug-21----765.15
10-Sep-21----765.15
24-Sep-21----765.15
08-Oct-21----765.15
22-Oct-21----765.15
05-Nov-21----765.15
19-Nov-21----765.15
03-Dec-21----589.29
17-Dec-21---- 0
31-Dec-21---- 0

This looks like I will miss out on the match for the last 2 weeks of the year, am I right in thinking that I should I be reducing my contributions percentage so that I get my full match through the last 2 weeks?
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Help with Employer 401k matching math

Post by Lee_WSP »

stocknoob4111 wrote: Sat Jul 31, 2021 11:55 am
This looks like I will miss out on the match for the last 2 weeks of the year, am I right in thinking that I should I be reducing my contributions percentage so that I get my full match through the last 2 weeks?
Yes.
Vanguard User
Posts: 2191
Joined: Wed May 26, 2021 5:46 pm
Location: Sugar Land, Texas

Re: Help with Employer 401k matching math

Post by Vanguard User »

Check to see if your plan offers True Up. This means you will get the match even if you reach the max early.
Topic Author
stocknoob4111
Posts: 3509
Joined: Sun Jan 07, 2018 11:52 am

Re: Help with Employer 401k matching math

Post by stocknoob4111 »

Vanguard User wrote: Sat Jul 31, 2021 12:00 pm Check to see if your plan offers True Up. This means you will get the match even if you reach the max early.
Thanks, I've never heard of this... will ask them.
exodusNH
Posts: 10347
Joined: Wed Jan 06, 2021 7:21 pm

Re: Help with Employer 401k matching math

Post by exodusNH »

stocknoob4111 wrote: Sat Jul 31, 2021 11:55 am To date i've contributed $12,789.51 to my 401k. Each paycheck I contribute $765.15 and my employer pitches in $218.62. I have 11 more pay periods remaining this year. Doing some rough math it looks like at the current rate I will hit my 401k contrib limit with my Dec 3 paycheck.

-------------12789.51
13-Aug-21----765.15
27-Aug-21----765.15
10-Sep-21----765.15
24-Sep-21----765.15
08-Oct-21----765.15
22-Oct-21----765.15
05-Nov-21----765.15
19-Nov-21----765.15
03-Dec-21----589.29
17-Dec-21---- 0
31-Dec-21---- 0

This looks like I will miss out on the match for the last 2 weeks of the year, am I right in thinking that I should I be reducing my contributions percentage so that I get my full match through the last 2 weeks?
Are they matching up to a certain % of your contributions? In other words, will the 03-Dec match be $218 again, or proportionally smaller?
Topic Author
stocknoob4111
Posts: 3509
Joined: Sun Jan 07, 2018 11:52 am

Re: Help with Employer 401k matching math

Post by stocknoob4111 »

exodusNH wrote: Sat Jul 31, 2021 12:20 pm Are they matching up to a certain % of your contributions? In other words, will the 03-Dec match be $218 again, or proportionally smaller?
Per the documents, they match upto 5% of wages, 100% match on first 3% and 50% match on 2% so the equivalent is a 4% match. The way I am interpreting this is that if I contribute at least $273 (which is 5% of my annual wages divided by 26 pay periods) then I will get the full match.
User avatar
AllMostThere
Posts: 886
Joined: Sat Dec 31, 2016 1:04 pm

Re: Help with Employer 401k matching math

Post by AllMostThere »

stocknoob4111 wrote: Sat Jul 31, 2021 11:55 am
03-Dec-21----589.29
17-Dec-21---- 0
31-Dec-21---- 0

This looks like I will miss out on the match for the last 2 weeks of the year, am I right in thinking that I should I be reducing my contributions percentage so that I get my full match through the last 2 weeks?
Yes, reduce contributions for avoid missing a match. As an alternative, does your employer match after-tax contributions, and can you utilize the Mega Backdoor Roth strategy? This would allow you to continue contributions towards retirement and get additional funds into Roth while still getting employer match. If not an option, then adjust balance of contributions for CY2021 to avoid missing any employer match.
It is not about how much you make; it is about how much you keep and how well you invest it. - Author Unknown | Dream as if you’ll live forever. Live as if you’ll die today. - Author James Dean
Boatguy
Posts: 233
Joined: Fri Apr 19, 2019 7:54 pm

Re: Help with Employer 401k matching math

Post by Boatguy »

AllMostThere wrote: Sat Jul 31, 2021 7:12 pm
stocknoob4111 wrote: Sat Jul 31, 2021 11:55 am
03-Dec-21----589.29
17-Dec-21---- 0
31-Dec-21---- 0

This looks like I will miss out on the match for the last 2 weeks of the year, am I right in thinking that I should I be reducing my contributions percentage so that I get my full match through the last 2 weeks?
Yes, reduce contributions for avoid missing a match. As an alternative, does your employer match after-tax contributions, and can you utilize the Mega Backdoor Roth strategy? This would allow you to continue contributions towards retirement and get additional funds into Roth while still getting employer match. If not an option, then adjust balance of contributions for CY2021 to avoid missing any employer match.
+1. This is what I do, but I still have to make sure that my contributions occur over all 26 paychecks (paid biweekly) in order to get the full company match of 6%.
golf101
Posts: 93
Joined: Mon Jul 15, 2019 11:30 am

Re: Help with Employer 401k matching math

Post by golf101 »

I would agree it’s worth reading your Summary Plan Description. I’m done maxing my 401k for the year so I’ll get a catch up company match the last day of the year. My company is very clear in documenting that for us.
exodusNH
Posts: 10347
Joined: Wed Jan 06, 2021 7:21 pm

Re: Help with Employer 401k matching math

Post by exodusNH »

stocknoob4111 wrote: Sat Jul 31, 2021 6:35 pm
exodusNH wrote: Sat Jul 31, 2021 12:20 pm Are they matching up to a certain % of your contributions? In other words, will the 03-Dec match be $218 again, or proportionally smaller?
Per the documents, they match upto 5% of wages, 100% match on first 3% and 50% match on 2% so the equivalent is a 4% match. The way I am interpreting this is that if I contribute at least $273 (which is 5% of my annual wages divided by 26 pay periods) then I will get the full match.
That's the standard safe harbor match.

Since I was on track to max out before the end of the year, I think your post just earned me a couple of weeks of free money if I dial back my deferrals so that I don't max out until the last paycheck. I've just written to my HR to confirm.

If that's the case, thank you!
tacobellcow
Posts: 91
Joined: Fri Jul 09, 2021 2:49 pm

Re: Help with Employer 401k matching math

Post by tacobellcow »

The plan true ups are great because you can over contribute. This will leave you a few extra dollars in November or December which can help pay for holiday gifts/parties/entertaining, or a lump sum payment to your IRA, kid's college fund. It could also be a good time to time a life insurance policy when you have a few extra dollars hanging around.
exodusNH
Posts: 10347
Joined: Wed Jan 06, 2021 7:21 pm

Re: Help with Employer 401k matching math

Post by exodusNH »

stocknoob4111 wrote: Sat Jul 31, 2021 6:35 pm
exodusNH wrote: Sat Jul 31, 2021 12:20 pm Are they matching up to a certain % of your contributions? In other words, will the 03-Dec match be $218 again, or proportionally smaller?
Per the documents, they match up to 5% of wages, 100% match on first 3% and 50% match on 2% so the equivalent is a 4% match. The way I am interpreting this is that if I contribute at least $273 (which is 5% of my annual wages divided by 26 pay periods) then I will get the full match.
To follow up, at least in my plan, we do not true up the contributions. If you max out before the final paycheck, you won't get the match dollars for those pay periods.
simpleliving1
Posts: 63
Joined: Wed Nov 27, 2019 8:55 am

Re: Help with Employer 401k matching math

Post by simpleliving1 »

jsk,d
Last edited by simpleliving1 on Wed Sep 08, 2021 12:00 pm, edited 1 time in total.
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Help with Employer 401k matching math

Post by Lee_WSP »

simpleliving1 wrote: Mon Aug 02, 2021 1:49 pm
AllMostThere wrote: Sat Jul 31, 2021 7:12 pm
stocknoob4111 wrote: Sat Jul 31, 2021 11:55 am
03-Dec-21----589.29
17-Dec-21---- 0
31-Dec-21---- 0

This looks like I will miss out on the match for the last 2 weeks of the year, am I right in thinking that I should I be reducing my contributions percentage so that I get my full match through the last 2 weeks?
Yes, reduce contributions for avoid missing a match. As an alternative, does your employer match after-tax contributions, and can you utilize the Mega Backdoor Roth strategy? This would allow you to continue contributions towards retirement and get additional funds into Roth while still getting employer match. If not an option, then adjust balance of contributions for CY2021 to avoid missing any employer match.
Instead of starting a new thread I will post my Question related to this comment. I am currently participating in 401K plan and My employer offer ROTH 401k contribution as well. Based on your comment if i contribute to ROTH 401K will my employer be contributing more to my plan? (i.e. X%(current match) + y%(extra due to after tax)? If that is the case should every individual enroll on ROTH 401k plan or is their a threshold based on tax bracket they are in?
The match is the same. The taxes you pay are different.
User avatar
AllMostThere
Posts: 886
Joined: Sat Dec 31, 2016 1:04 pm

Re: Help with Employer 401k matching math

Post by AllMostThere »

simpleliving1 wrote: Mon Aug 02, 2021 1:49 pm
AllMostThere wrote: Sat Jul 31, 2021 7:12 pm
stocknoob4111 wrote: Sat Jul 31, 2021 11:55 am
03-Dec-21----589.29
17-Dec-21---- 0
31-Dec-21---- 0

This looks like I will miss out on the match for the last 2 weeks of the year, am I right in thinking that I should I be reducing my contributions percentage so that I get my full match through the last 2 weeks?
Yes, reduce contributions for avoid missing a match. As an alternative, does your employer match after-tax contributions, and can you utilize the Mega Backdoor Roth strategy? This would allow you to continue contributions towards retirement and get additional funds into Roth while still getting employer match. If not an option, then adjust balance of contributions for CY2021 to avoid missing any employer match.
Instead of starting a new thread I will post my Question related to this comment. I am currently participating in 401K plan and My employer offer ROTH 401k contribution as well. Based on your comment if i contribute to ROTH 401K will my employer be contributing more to my plan? (i.e. X%(current match) + y%(extra due to after tax)? If that is the case should every individual enroll on ROTH 401k plan or is their a threshold based on tax bracket they are in?
No, with your pre-tax 401k contribution or Roth 401k contribution, your employer match will be the same (i.e. there is no kicker or bonus match for 401k Roth, etc.). Additionally, regardless of pre-tax or Roth 401k contribution, your employer match will be considered pre-tax contribution, so will be taxable when retirement withdrawal's are made. Hope this helps.
It is not about how much you make; it is about how much you keep and how well you invest it. - Author Unknown | Dream as if you’ll live forever. Live as if you’ll die today. - Author James Dean
simpleliving1
Posts: 63
Joined: Wed Nov 27, 2019 8:55 am

Re: Help with Employer 401k matching math

Post by simpleliving1 »

jlbvk.
Post Reply