Determine When Your Employer Meets Your 401 (K) to Maximize Your Benefits
If your employer pays for you in your 401 (k), it might be worth checking when he pays your match. In some cases, you may not get a complete match until the end of the year.
As Reddit user BigBolter explains, if you pay an extra fee to your 401 (k) and hit your cap earlier, your employer’s contributions will end as well. After all, at the end of the year, most employers will make a so-called “right” payment to offset your benefits up to what was originally offered. However, the timing of this catch-up can affect your bottom line:
For example, suppose you earn $ 104,000 a year and contribute 25% of each paycheck to your $ 401,000 before taxes. Your company offers a 1: 1 ratio to your contributions, up to 5% of your gross salary.
Assuming you receive 26 salaries per year, your pre-tax salary is $ 4,000. This results in an employee contribution of $ 1,000 in salary and $ 200 in company compensation. You would hit the $ 18,000 limit on check 18, earning a $ 3,600 match.
However, if you lower your percentage contribution to ~ 17.31%, you will be contributing $ 692.4 for each salary, but you will still receive the company compensation of $ 200. You will reach your annual limit on your 26th and final check and receive a $ 5,200 Company Match.
Of course, a few months doesn’t really matter when you’re dealing with a 401 (k) that’s designed to last for decades. However, in principle, the sooner you can invest your money, the more money it will bring you. If you are planning to leave in the middle of the year, it is also worth asking the terms and conditions for paying compensation to your employer before leaving the company. If you run out of your dues in June, but the company doesn’t make the “exact payment” by December, then if you leave in August, you’ll want to know how much they owe you.
LPT: Don’t increase your 401k annual fee sooner when your company offers a 401k match. | Reddit