Hi All!

Let's talk about employer contributions to our 401K, 403B or TSP accounts.

I'm not sure if HR departments can make it any more confusing than it already is!

Today we are going to break down the most common ways employer contributions can go.

Companies have 3 main ways they can contribute to your 401K.

- They can match a certain percentage up to a certain dollar amount.

- They can match a certain percentage up to a certain percentage of your income.

- They can just put in a set dollar amount every year which may be a percentage of your income up to a maximum dollar amount.

Let's get some examples of how this looks.

- Let's say your company has a 5% match with a maximum yearly contribution of $2,000. You contribute 10% of your income to your 401K (Just to keep the math easy!)

Your Paycheck:               $1,000 weekly

Your Contribution:            $100 (10% of your income)

Employer Contribution:    $50 (5% of your income) until $2,000 contributed.          This means your employer only contributes the first 40 weeks of the fiscal year.

- Let's say your company has a 100% match with a maximum yearly contribution of 5% of your income. You contribute 10% of your income to your 401K.

Your Paycheck:               $1,000 weekly (salary $52,000 a year)

Your Contribution:            $100 (10% of your income)

Employer Contribution:    $100 (100% match) until 5% of your salary is contributed ($2,600).  This means your employer only contributes the first 26 weeks of the fiscal year.

- Your company may just contribute a dollar amount every year which is based on 10% of your income up to a maximum of $5,000. 

Your yearly salary:           $52,000

Your Contribution:            Up to you

Employer Contribution:    $2,600

What do people mean when they say "don't leave money on the table"?

- Let's say your company has a 5% match with a maximum yearly contribution of $2,000. You contribute 3% of your income to your 401K. 

Your Paycheck:               $1,000 weekly

Your Contribution:            $30 (3% of your income)

Employer Contribution:    $30    (Your employer is offering a 5% MATCH but you only put in 3% so they will only MATCH your 3%.)

Whew! Thats it for today!

See you next  week!