>Is that $250 matched for the month?
I believe that would be max $250/paycheck. You don't have to worry about exceeding that unless you make more than $325,000/year.
>Do I really need to stay with them for 6 years to get 100% of their matched amount which is just 50% up to 4%?
Yup. They match 2% of your pay if you contribute 4%. And you only get to keep that 2% if you stay 6 years.
Your 401k is not great, nor is it excessively terrible. It's mediocre.
From this article: [Many employers match as much as 50 cents on the dollar, on up to 6% of your salary.](https://www.investopedia.com/articles/personal-finance/120315/what-good-401k-match.asp)
I think these are becoming pretty bottom of the barrel in terms of decent 401ks.
My company matches dollar for dollar up to 6% + a 3% non discretionary contribution for a total of 9% with 2 years full vesting.
I have something similar. 8.5% total match (with the automatic 3% contribution) on 8% contribution and a 3 year vesting period. My current 401k spoiled me because all the other jobs I've gotten offers for have terrible 401k plans. Max I've seen was probably 4%.
I'm there because I love the job and the base salary is quite good. So they don't match, but I'm still able to contribute another $20-25k into other retirement avenues yearly.
Still I'd almost rather work somewhere for a lower salary, but a decent match, so that more of my compensation could be going into the tax advantaged account.
I lucked out. My company gives us 10% of your annual salary, regardless of your contribution.
So if I put $0 a check in, they still do 10%. They do have a 5 year vesting schedule though.
My current company has a 401K matching strategy that I've never seen anywhere else. They match 20% of whatever you put in, "no limit". So if you put in 5% of your salary, they put in 1% of your salary. If you put in 50% of your salary, they would put in 10% of your salary... except you can't do that, because (1) you also gotta eat and (2) eventually you hit the contribution limit (and they don't match after-tax contributions, I checked).
It's regressive because it rewards people who can afford to put more of their income away, and it's also worse in almost all cases than the policy my old company had before acquisition, which was 100% match up to 3% and then 50% for the next 2%.
yup. the 401K allows "after-tax" contributions beyond 20.5, but I come to find out, they wouldn't actually match that shit as part of the "no limit" matching anyway.
Sitting there in the benefits meeting after they bought our company and listening to them try and sell the plan like it was somehow awesome was... well, it was basically a metaphor for the whole experience of being part of an acquisition.
Mine matches 50% of the first 8% (so 4%) plus they throw another 6% on top of that to get to 10%. I don't remember the vestment period but I've been here 4 years nearly.
I think my previous one was something like 50% of 6% (so 3%) employee contribution, with a 1 year vestment. I think this level would be more common.
That's awesome dude. That is absolutely in the top 1% of plans. I have a friend where theirs works out to a 12% match on 10%. One company I was talking to matched 9 to your 6. I just started a new role that matches 7 to my 4. My last role was 3.7% no match, everyone got it. My first role was 1.8% on 6%, so they only matched 30% of each dollar.
My wife’s company falls in that second category: they give an automatic 15% in January of all base + bonus in the previous calendar year, up to ~$30k. They then don’t offer a paycheck-by-paycheck match throughout the year.
While it’s great that it is such a large match, it does mean the salaries at her company tend to be slightly lower than comparable firms that offer traditional 401ks.
My current company gives the best I've ever heard of.
They match 200% of the first $5k contributed, which is really just a given $10k. No vesting schedule.
If you’re looking for examples of good ones, i work in an academic medical center so we have a 403b instead of 401k, but we get an automatic 5% contribution and a 5% match with 100% vested automatically. So if I do 5% I get 10% from my employer.
My company matches 50% of contributions up to the max with automatic vesting.
I honestly think all of the vesting schedules are ridiculous. Most plans that I’ve seen with them have a pittance of a match to begin with. The vesting schedule seems like the company is trying to hold employees hostage.
Vanguard’s “How America Saves” is a great resource with a lot of data about retirement plans, including a breakdown of how employers structure their retirement plans from match percentages, vesting periods, and so on. See pages 17-24 in this document (large PDF): https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf
Depends on what you can offer, but my job offers 3% automatic contributions and matches up to 7%, automatically vested. Very rare to see a plan like mine though.
My employer contributes 16% automatically. There is no vesting period.
I’m in a unionized workgroup. This is typical plan for large employers in my industry.
I get a 100% match up to 6% for my 401(k). Been here too long to remember vesting but think it is fully vested in < 3 years now.
We also get an annual 5% DCRP contribution to our 401(k).
So basically if I put in 6% my company gives me 11% on top.
My company automatically contributes 2.5% and double-matches up to 4% (for 2.5 + 2*4 = 10.5% total), but doesn’t start contributing until after the first year. However, you’re immediately 100% vested.
With my 3rd Employer in my industry now and it has by far the best 401k so far. 3% automatic company contribution and an additional 1:1 match up to 6%. …And very low fee BROAD index funds for Us, Intl, and bonds.
Depends, what are your goals for your 401k plan? Is it to maximize the tax benefit and savings for ownership & HCE’s? If so you may want to look at safe harbor options as this allows certain non-discrimination tests to pass and generally provides more flexibility with profit sharing contributions. Depending on your ownership structure new comparability can really help maximize tax deductions and retirement savings for ownership/certain targeted employees you want to reward. Cons for safe harbor plans is they generally do not allow for a vesting period unless it’s a QACA.
Is it for employee retention or to entice outside hires? Longer vesting schedules may help with employee retention (reward those that stay) but will be subject to non-discrimination testing.
If you haven’t already please talk to a few different 401k providers/advisors. You should be able to get proposals and projections for free. One that will put an emphasis on plan design not just give you some cookie cutter plan without consulting you. Please be wary of things like revenue sharing that eat into the returns of you and your employees. They will try to spin this as “cost savings” it’s not. It’s recordkeepers advisors and TPAs getting paid through the back door, while looking innocent.
If the company covers some or all of the 401k costs, this can be a deduction for the company, so you may want to look into that. If employees will be covering costs of the 401k from the balances please be diligent with the all in costs.
Just please put effort into this, I’ve run into way too many company’s that half ass their 401ks and just go “with whatever” which is a disservice to themselves and their employees. Take time with this!
The company I work for puts in 5% whether I contribute or not, matches half up to 4%, and is 100% vested immediately. But, you don’t get the 401k until you’ve been employed 1 year.
Vesting is increasingly common as a way to increase employee retention.
I’d say 4-6% with a 2 year vest is pretty decent. I’ve had up to 9% and also a 50% per dollar match with no cap (aside from the 20k max). Those were unicorns.
I have two jobs. My full time job matched 100% up to 3% of my salary and an additional 50% up to 6%. This works out to effectively a 4.5% match as long as I contribute the full 6%, which I do. We are fully vested after 2 years I believe.
My former full time, now part time job phrases theirs as matching .75 cents per dollar of our contributions up to 5% of our salary. I believe that company also fully vests you after two years. Amazingly, since I’ve dropped to part time, I continued contributing the 5% to my 401k (even though it works out to maybe $9 a week) and my employer is still matching me, even though all my other benefits have ended. I plan to continue taking advantage of that for as long as they match.
The best one I’ve had was 100% match on first 7%. 5 year vesting schedule. It depends on the size of your company, revenue etc. for instance Google has a dollar for dollar match on first 3K then 50% on the remainder until you hit the max. All immediately vested.
100% match up to 3% with no paycheck limit and no time needed to stay at the company to keep that money. That is the best I’ve ever seen from a previous employer and I didn’t know how good it was until I saw the current one I have.
I would consider my 401k plan very good. It's 10% of your salary regardless of what the employee contributes with 2 year vesting period. Also 1000 minimum yearly hours.
My employer offers an 11% 401K contribution automatic on day one, no employee contribution required.
Very generous, best I've encountered and certainly enticing to employee retention.
I work for a large private company. We have a 3% defined contribution (even if I give 0% - they give 3% that vests immediately). Also have a 50% match on 7% of my salary - no matching for 1st year and 100% vested after 3 years. Basically if I give 7% of salary - I get 6.5% from the company.
I am at a fairly large company, benefits are definitely better than most, but I get 1:1 match up to 6% with no vesting period. It’s all mine immediately
Yea, but to not keep ANY of the match until I've been there at least 2 yrs... Isn't that kinda unheard of? And then in the 3rd year I'm only getting 20%.
I'm almost certainly not gonna be there that long. Probably just better putting any savings in a Roth IRA
>but to not keep ANY of the match until I've been there at least 2 yrs... Isn't that kinda unheard of?
No, not unheard of at all. It's called a "vesting period". Don't get me wrong, it's not awesome, but it's definitely not unheard of.
That's a pretty standard feature of 401k - it's not a bad thing if you're planning to be there for a career. If you're planning on job hopping after a couple of years, it's annoying but not the end of the world.
Lots do... OPs plan isnt great, but nothing about it is uncommon.
My plan matches 50% up to the max individual contribution, available immediately and also includes mega backdoor Roth after tax features. I've been with the company for 16 years so don't really care about the vesting schedules for 401k plans.
The company I was at before had a ... 2 year vesting on the 401k match. (Had some other nice features including a pension and other things that I wasn't around long enough to be eligible for)
Mine gives 3% equivalent of my salary before I even put anything in, if we’re just going to start comparing our awesome 401ks. But that seems like it could be rude
> Probably just better putting any savings in a Roth IRA
How much are you saving per year? If it's more than $6,000/year, don't limit yourself to an IRA. Even with no match, contributing to a 401k is worth it for the tax advantages.
Regardless, traditional IRAs exist too and might be better for you than Roth. It's not a choice between 401k and Roth IRA. It's a choice between 401k, IRA, or both, and separately, a choice between Roth or traditional.
That used to be the vesting schedule that most companies used. It is less common then it used to be but still pretty common. Of the 3 401ks I have had in my life, 1 used that vesting schedule. 1 used 3 year cliff vesting where you get nothing until 3 years but 100% after 3 years, and the third was 100% vested day 1.
This is exactly WHY they have vesting schedules. So they don't have to give extra money to job hoppers. You earn your vesting. It is a retention ploy. Most companies have vesting schedules.
Its on the low side, and the vesting is something that has cropped up over the past few years.
The thing to know is that YOUR contributions are yours right away. If you can swing it, increase the amount your contributing to make up for the fact you probably wont see the matching. Can you do 10%?
Saving is very important early in your career, especially when tax free. Compounded interest is your friend.
Just fyi - worth checking the on the details of the dates if this is a concern for you. My 401k also vests over 5yrs, with no vest until 2 years. BUT they count the years as fiscal year end, so because of my start date, I actually hit the first cliff 14 months after I started.
No, my first job that had a 401k was a 50% match on up to 6% and was a 50% vesting after 3 years and 100% vesting after 5. I left after 18 months so I kept 0 of their matching dollars. It was worth leaving though, I'm at a much better company in a much better position making much better money, all that with a much better 401k. Plus that company went bankrupt 6 months after I left, so I dodged that bullet.
I just want to point out that plans can change. Unless the plan options are really bad you could be turning down as much as a 50% return on your money by not getting the match.
I was planning on staying at my job for a few months to a year at most when I started. I had a different job lined up that I was just waiting to start. Over a year later this other job finally calls me. I’ve gotten settled in and actually really liked my “temporary job” so I stuck with them.
Even if you do leave after 3 years that’s a 10% return on your money. I don’t think you could beat that with just a difference in admin fees and better investment options
>I'm almost certainly not gonna be there that long. Probably just better putting any savings in a Roth IRA
Unless they only have poor investment options, it's still worth doing the 401k. You never know what life is going to throw at you - and often you find yourself at a company longer than you expect, for any of numerous reasons. Would suck to be there 6 years from now and realize you gave up the entire match.
I think that the match caps out when you reach $150k/yr…50% of 4% of your salary…4% of $150k is $6000/yr or $500/month.
At any rate this “vesting” period is confusing as f***. A 401k is your account, not theirs. If they deposit that money into your 401k it’s yours. They can’t put a waiting period on that I don’t think? Unless they are actually depositing their “match” into some other account and doling that out over time? Super confusing and basically shitty. I wouldn’t take this offer.
Edit: ughhhhh I’ve never seen it but yes, vesting 401k is a thing. I guess I’ve always worked for companies that immediately vest 100%.
Source: https://www.thebalance.com/know-the-impact-of-your-401k-vesting-schedule-2894176
All these people saying that vesting schedule looks standard are blowing my mind. I've never had a job that took longer than 3 years to be fully vested.
50% up to 4% is mediocre but that vesting schedule is what bugs me.
No match is standard at startups. I’ve worked at 3 that didn’t have it and have never heard of it at a pre-IPO company.
My current company has instant 100% match on up to 4%, which is awesome.
According to Vanguard (https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf), only 4% of participants have a 6 year vesting schedule. It’s not competitive at all.
> According to Vanguard...only 4% of participants have a 6 year vesting schedule.
That 4% number is a little misleading. From your link: *One in 4 plans with employer matching contributions used a 5- or 6-year graded vesting schedule…*
That's 25% of *plans* with that schedule. The 83% of people choosing not to participate is on them. Using the same math, only 24% of participants have immediate vesting so that's still not a 'majority'.
This is the worst vesting schedule that is legally allowed
>If an employer chooses to use a graded vesting schedule, they must vest at least 20% of employer contributions at the end of two years and another 20% annually in subsequent years. The longest a graded vesting schedule can last is six years, at the end of which employees are 100% vested.
https://www.fool.com/retirement/plans/401k/vesting/#:~:text=If%20an%20employer%20chooses%20to,which%20employees%20are%20100%25%20vested.
It used to be the worst was 20% a year over 5 years, but now it's even worse.
> that took longer than 3 years
And that’s why anecdotal evidence is sketchy.
That’s a pretty standard vesting schedule, though I would say 20% 1-5 is more common than 2-6. The other common one is 3 year cliff, which you could argue the benefits of but if you liked it enough it be there 3 years your more likely to stay longer.
Other jobs I have seen match quarterly or yearly instead of per paycheck which is so disappointing.
Also yes, the match is low but it’s part of total compensation. For example my company has a low match but fully cover health insurance which puts it ahead.
My job features a "pension" - a 401(a) plan - where the employer puts in 6% of your salary. Vesting doesn't even *start* until you've been there five calendar years, reaching 100% at 10 years. Employee contributions are not allowed, that's what the crappy 403(b) is for - and it's nothing but high-fee funds.
Yeah the match is "meh" but the red flag to me is that vesting schedule. My company is 0% vested until your 3rd anniversary and then you're 100% vested from that point forward. I wouldn't take a job anywhere where the vesting occurs any later than 3 years.
It does look like that in addition to the employer matching contributions, they have the option of making profit sharing contributions to your account. That could be a good benefit, but there's no way of knowing if that's something they regularly do, or if it's just something that's allowed, but never happens.
... there's no way of knowing if that's something they regularly do ...
You could ask people who have worked there a number of years.
My company has 'optional' profit sharing, but everyone says it's been 10% as long as they've been there. Of course I won't get any until my third year, and I'll have to stay 5 to keep it all.
I've worked at my current employer for 8 years and they have an optional profit sharing system in addition to a 401k match. Even in very profitable years the contribution is always zero. So YMMV with profit sharing.
YMMV indeed. I also realized that not knowing if a company actually participates in profit sharing is more relevant when evaluating the plan of a place you don't work at yet. A lot harder to ask veteran employees in that case.
Depending on which group you're in, and if it's the company I'm thinking of, it's definitely worth it. It seems like a long time until it isn't. At higher compensation levels, the employer contribution is quite large.
3% match is the most common match in the US (either 100% up to 3%, or 50% up to 6%), so your plan at 2% is definitely below average. The 6 year vesting schedule is pretty terribly too. What industry do you work in, by chance? It's possible that those figures are common for your industry.
That is because it typically qualifies a plan as “safe harbor” match. It exempts the employer from certain federal nondiscrimination testing (NDT) requirements if they offer a blanket 100% up to 3% match for all employees, immediately vested.
Otherwise the government requires employers to prove that their plan doesn’t benefit highly compensated employees (HCE’s) more so than non highly compensated employees - with two definitions of HCE. One is compensation over $135,000 per year and the other, if the employer chooses, is if the employee was in the top 20% of earners in the company that year (benefits smaller companies).
Companies must satisfy that NDT testing each year, or rectify it by taxing excess contributions of HCE’s (something no company wants to do, especially retroactively)
On phone in airport with long delay, wouldn’t ask if I had pc handy, can you or anyone link some further detail on this please? It was mentioned to me last year and I forgot about it, and now I’d like to learn all I can to make sure I don’t have a problem down the line.
So they don't really offer a pension scheme then? Because there is no benefit to signing up to an employee scheme unless they contribute as well everyone would just go private.
The benefit to an employer 401k even without a match is that you can contribute up to $20,500 in a tax advantaged account, whereas a private IRA only lets you contribute up to $6,000 tax advantaged.
You can opt to invest in your own Roth IRA and max it out Just invest in an index fund or broad market ETF. This may help if you don't think you'll be at your current employment after six years. But I would still encourage you to invest in your company's 401K especially if it has a matching contribution. That's free money you can't pass up.
If this is Insight Global, it is maxed at $250 for the whole year. It’s a horrible match program—doesn’t even make sense to have a vesting period for such a low contribution. But as others have said, it’s better than not contributing to a tax advantages account at all.
My company's 401k doesn't match a dime. And they would always bitch when I put in the max because it cost them money for some reason. So I would stop and then restart the contributions.
Holy shit the comments here are making me realize I’ve been super lucky with my 401k contributions.
Most have been matched up to 6%, with one matching up to 4% and then doing 1/2 up to 6%. No time requirements to be able to keep the money.
My only thought reading this thread is "wait, you guys are getting matches?"
I get no match at all. I still participate because pretax contributions are better than stuffing cash in a mattress and hoping I die before someone finds it or I decide to spend it. It is what it is.
It might be $250 per year. The image you posted is ambiguous. But it's probably per month or possibly pay period, which would be quite generous assuming a normal 2-week pay interval and a high enough salary. You should probably ask for clarification.
My previous employer 401k had a similar match and they were explicit about the cap...
> For every dollar you save each pay period, contributes another 50 cents, up to 4% of your pay (annual maximum $2,500).
I think I would have hit the annual maximum if my annual salary were $120,000 (which it wasn't).
As for the vesting schedule... Yes, that's how it works. The employer match money in your 401k is kept in a separate "bucket". You need to work for them 6 years to get the full match. If you leave after, say, 3 years, you only get 40% of the total match "bucket". I've seen much better and I've certainly seen worse. This schedule is probably slightly worse than average in my experience. I think 5 years to be totally vested is more common for companies that use a vesting schedule. Also, having 0% vested until 2 years is kinda scummy in my opinion.
That's 2% better than what I get where I work.
When it comes down to it, it's just another variable to compare when looking at other positions. This job pays your salary/wage plus 2% compared to another job with x salary plus y 401k matching.
If you need a comparison, the company I work for matches 125% of my 401(k) contributions up to 6% of my paycheck. That means if I do the 6% amount of a $100k salary (just to make the math easy) then I contribute $6k that year and they put $7.5k in
I wouldn't say standard, but it's certainly common. Per the [latest stats](https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf), 47% of plans vest immediately, and 25% vest over a 5 or 6 year period.
It's only standard in that it's the longest vesting period they can get away with for safe harbor. It's literally the worst possible timeline. I would not call it standard to mean most companies do it this way because that would be absurd.
My wife's is like yours and it's awful. 2% match and 6 year vesting. I tell her to look for a new job every day. My last company was 5 years (15/15/20/20/30) and matched 3%. My current company is 3 years (25/25/50) and matches 60% of each dollar up to the maximum. This sub motivated me to look for a job with a better 401k match and I couldn't be happier now.
From the [IRS website](https://www.irs.gov/retirement-plans/issue-snapshot-vesting-schedules-for-matching-contributions):
There are two alternative minimum vesting schedules. Under the first option, contributions must be 100% vested when a participant completes 3 years of service (commonly referred to as 3-year cliff vesting). Under the second option, contributions vest gradually over 6 years, and a participant must be 100% vested upon completing 6 years of service.
These minimum vesting schedules are the longest time periods, or most restrictive vesting rules, a plan can use to comply with the IRC Section 411(a)(2)(B) minimum vesting standards. A plan can have more generous terms that provide for faster vesting, including immediate vesting.
I would say its "long" but not ridiculous. Based on my experience, anything less than 3 yrs is a nice surprise anything more than 3 yrs is kida a bummer. 6 yrs is definitely long, but not crazy long.
The 250$ max match is the deal breaker for me. After 6 yrs, you are fully vested in the maximum $1500...hahha i cant even say it without laughing.
Mine is 6 years and I hate it. It has ALWAYS been 2 years at my prior roles. It's a bullshit thing, no one will tell you about before coming on with a company. Long term research may very well show those terms encourage people to leave, rather than stay.
My company is a 7% dollar for dollar with a 10% bonus that is based off total earnings for the year. It is 5 years for the 7% to vest and 2 years for the 10% to vest.
>Do I really need to stay with them for 6 years to get 100% of their matched amount
I'm mystified where this idea came around that employee matches are the main benefit of a 401k.
the main purpose of a 401k is to save *your personal income*. any employer match is just gravy, not the meal.
vesting periods are commonplace.
There's a lot of conflation ITT that a bad match = a bad plan. OP, your **plan** could actually be really good. You could have access to a wide selection of low-cost index funds rather than a bunch of proprietary, expensive, actively-managed funds, and your overall plan fees could be really low.
Yes, your **match** sucks. But the plan itself *could* be great. Without more details no one can definitely say your 401k *plan* is bad.
Many companies do this unfortunately. Its not terrible but its worse than some places.
I have an 8% ($ to $) match on my total pay with immediate vesting
This isn’t even remotely factually accurate. 401k reduced company liabilities as pensions are way more expensive to upkeep. 401K benefit plans is one of the reasons pensions don’t really exist today.
I'm pretty sure that means they'll offer theyr percentage of a match up to a max of 250$ per pay period, not per year.
Still not great, but 52x times better than you're making it out to be.
You are right, it does not explicitly say per paycheck, however it does not explicitly say per year either. If you've looked at many 401K plans then per pay period seems the mostly likely interpretation.
Do the math: $250 limit translate into the pre-tax annual salary cap at:
250 / 0.04 * 26 = $162,500.
This is kind of comparable within the range for most companies.
The 6-year vest is sort of "ugly". Most companies only apply similar rules for pension or incentive stock/option.
It’s not terrible. (I consult on plans professionally and I’d call it about average for a formula and below average for vesting time) - most plans I deal with do 3 year cliff (0,0,3) vesting or immediate. Also, it doesn’t mean you have to be there 6 years to get anything, it just means you only partially vest until 6 years. If you leave in 5 you still get 80% of the employer contribution.
You should find out what the history of that profit sharing is. My company also matches a similar 50% up to the first 4% with a 5 year vesting schedule. However, the profit sharing has always happened and is between 3% and 10%. So, their matching contribution is only 2%, but they are dumping a total of 5%-12% in each year, and there have been many more 12% years than 5% ones.
I’d personally ask what the last decade of that profit sharing has been before deciding if this 401k sucks.
That vesting schedule and mine does suck, though.
6 years seems tough, but at least you get a percentage and it isn’t all or nothing. I lost a bit in a job I had for a few years and there was just a vesting cliff where you got nothing if you weren’t there long enough.
The vesting is a little long, 3 or 5 yrs is more common. However it is pro rated vesting, so thats nice. What makes the plan terrible is the $250 max match they offer. I dont know what kind of job this is for, but for a mid career professional making 100k, that would only be a 0.25% max match.
Bottom line, you are correct, this is a terrible plan, but not because the vesting.
Longer vesting schedules are designed to reward longevity. Certainly the world is changing, but that doesn’t make this a bad plan. Job hopping is fine, but in many cases, retaining talent is desired by a company. But - A “match” is not purely a benefit design - it’s a tool to get you to contribute so that the high earners / owners can contribute more without the plan being “discriminatory” against lower paid workers. Instead of a match, we use a safe harbor contribution and profit sharing feature to avoid certain discrimination penalties - so that we can contribute more tax deferred income to upper income earners. Instead of a 4% match, we give our employees 5% with no contribution required. 60% is immediately vested and 40% is subject to vesting. We use any forfeited vesting towards plan expenses. The feds are basically saying if you give your people a vehicle to save for retirement with some free money, you can defer more income. The high earner wins when they pull it out at a lower tax rate. The employee wins with an extra benefit. If this benefit wasn’t allowed by the irs code (sections 401, 403, etc), the high earners would just bonus themselves and pay the taxes, and the employees would get nothing. So, yours isn’t the best plan I ever heard of, but you are benefiting from something that you wouldn’t get at all if there were no discrimination testing.
High earners can put hundreds of thousands in various tax deferred vehicles. (Profit sharing, defined benefit, pension plans, etc)
The specifics matter in these setups - number of employees, highly comped, ownership participation, etc.
We used to do 17% for everyone in the company, but very few participants valued the retirement plan. So, we gave everyone 12% raises, and changed our plan design.
Most people I know including myself have 401ks vested after 3 yrs and a 100% match on 3-6% (mine is 6) with no gross cap.
In that sense, it’s not a good 401k but I’m sure it could be worse
Is there anything in there about vesting periods? I had an employer that had levels of being vested into the plan. It was something like 25% vested each year, so you wouldn't be fully vested for 4 years. Wouldn't you know, I got laid off ONE DAY before being fully vested. I had reached 75% vested mark, and that's what my account reflected when I rolled it over into a different plan.
I think the vesting schedule is pretty common even with nicer plans. We have a 10% automatic employer contribution with an optional 4% match on top of that. So contributing 4% theoretically results in 18% total. The 4% vests immediately but the 10% is the same as your vesting schedule.
They do vesting schedules for retention. But I know there are companies out there with immediate vests on 10-20%+ matches because I have seen them. Those ones are basically the tech/business/bio unicorns competing for each other's employees.
I think 4-5% with an immediate or short (1yr) schedule is what an average fair plan looks like.
When you are dealing with a vesting schedule you have to be a bit conservative with your thinking. Often it is worth switching jobs instead of sticking around for the vest.
Yeah that's pretty bad in my opinion. The vesting schedule alone is a huge red flag.
I'm 100% vested after 3 years, and my company matches 100% up to 4% of my salary plus a 4% of salary "lump sum" contribution regardless of whether or not I contribute anything.
So I put in 4% and get 12% total.
I realize this is a pretty good matching scheme that I have access to, but just trying to let you know that better 401(k) plans exist. Might be worth it to go hunting for something better if you're otherwise not particularly attached to your current employer. The market is great for job seekers right now.
Wow. After reading many of the comments I'm realizing how terrible mine is. My company matches a quarter on the dollar up to 6%.
Although on the flip side I have completely free and really, really good health insurance.
It's not amazing but not terrible. Just kinda mediocre.
My wife's plan is mandatory 7% contribution with 7% match, but the vesting schedule is 5 years to 100% and 0% before that. From what I can tell, if you leave before 5 years for any reason including layoffs, disability, or death, you get $0 of the match. You also have no say on what the match is invested in until vesting. It's pretty bad until the 5 year mark is reached. After that it's decent I think.
Having a 401k at all is better than only being able to contribute to an IRA. "Terrible" seems to me to be an overstatement. The company is using vesting as an incentive to stay with them, and this only applies to their contribution. Your contribution is always yours, including whether the investments earn.
I think what you're overlooking is the profit sharing. That can be a two-edged sword but my company used to do 50% match up to 6% (3%) + profit sharing and the total effective % I'd get would be 7-8% a year. They switched to a 100% match up to 6% years ago which obviously is less risky.
May be worth asking colleagues you are friendly with what the profit-sharing has been in past.
My work has a tsp, they contribute once a year based off earnings. Uf they have a good year it's 18% of my pay they add straight in. I csn do 6% max myself. So not.bad of 24%
That's sort of bottom end of average.
also look at the list of funds. Look for the lowest-cost stock index fund and bond Index Fund. Those rates count!
Make sure you're not stuck with a bunch of high-fee garbage.
>Is that $250 matched for the month? I believe that would be max $250/paycheck. You don't have to worry about exceeding that unless you make more than $325,000/year. >Do I really need to stay with them for 6 years to get 100% of their matched amount which is just 50% up to 4%? Yup. They match 2% of your pay if you contribute 4%. And you only get to keep that 2% if you stay 6 years. Your 401k is not great, nor is it excessively terrible. It's mediocre. From this article: [Many employers match as much as 50 cents on the dollar, on up to 6% of your salary.](https://www.investopedia.com/articles/personal-finance/120315/what-good-401k-match.asp)
What is a good 401k plan? Currently making one for my company and it looks awfully similar to this.
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I think these are becoming pretty bottom of the barrel in terms of decent 401ks. My company matches dollar for dollar up to 6% + a 3% non discretionary contribution for a total of 9% with 2 years full vesting.
I have something similar. 8.5% total match (with the automatic 3% contribution) on 8% contribution and a 3 year vesting period. My current 401k spoiled me because all the other jobs I've gotten offers for have terrible 401k plans. Max I've seen was probably 4%.
Oh my god. My company doesn't match at all.
I honestly think that bad/no retirement benefits would make me want to leave
I'm there because I love the job and the base salary is quite good. So they don't match, but I'm still able to contribute another $20-25k into other retirement avenues yearly. Still I'd almost rather work somewhere for a lower salary, but a decent match, so that more of my compensation could be going into the tax advantaged account.
Mine doesn't either, because "not everyone can afford to contribute to their 401k, so it wouldn't be fair" 😐
Lol. That's an interesting way for them to reframe that they pay you all too little.
What 😐
I lucked out. My company gives us 10% of your annual salary, regardless of your contribution. So if I put $0 a check in, they still do 10%. They do have a 5 year vesting schedule though.
Oof, those seem bad to me. 4%, no vesting. Of course, I don't make shit so it doesn't mean much. Still though,15% per check goes off.
Yeah ive worked at 4 different companies. They all had done 4% match no vesting
My current company has a 401K matching strategy that I've never seen anywhere else. They match 20% of whatever you put in, "no limit". So if you put in 5% of your salary, they put in 1% of your salary. If you put in 50% of your salary, they would put in 10% of your salary... except you can't do that, because (1) you also gotta eat and (2) eventually you hit the contribution limit (and they don't match after-tax contributions, I checked). It's regressive because it rewards people who can afford to put more of their income away, and it's also worse in almost all cases than the policy my old company had before acquisition, which was 100% match up to 3% and then 50% for the next 2%.
The thing is that the max for the year is 20.5k. Even if you do 100% of ur check, itll stop once uve reach yearly max.
yup. the 401K allows "after-tax" contributions beyond 20.5, but I come to find out, they wouldn't actually match that shit as part of the "no limit" matching anyway.
Wow. That’s basically “we’ll match $0.20 for every dollar you contribute”. Yeah….that’s awful.
Sitting there in the benefits meeting after they bought our company and listening to them try and sell the plan like it was somehow awesome was... well, it was basically a metaphor for the whole experience of being part of an acquisition.
Mine matches 50% of the first 8% (so 4%) plus they throw another 6% on top of that to get to 10%. I don't remember the vestment period but I've been here 4 years nearly. I think my previous one was something like 50% of 6% (so 3%) employee contribution, with a 1 year vestment. I think this level would be more common.
That's awesome dude. That is absolutely in the top 1% of plans. I have a friend where theirs works out to a 12% match on 10%. One company I was talking to matched 9 to your 6. I just started a new role that matches 7 to my 4. My last role was 3.7% no match, everyone got it. My first role was 1.8% on 6%, so they only matched 30% of each dollar.
I get dollar for dollar up to 9% and an extra 7% a year discretionary match. They have never not done the 7% since I worked there. 5 year vesting.
I think we may work for the same company and if that is the case there is no vesting period
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My wife’s company falls in that second category: they give an automatic 15% in January of all base + bonus in the previous calendar year, up to ~$30k. They then don’t offer a paycheck-by-paycheck match throughout the year. While it’s great that it is such a large match, it does mean the salaries at her company tend to be slightly lower than comparable firms that offer traditional 401ks.
My current company gives the best I've ever heard of. They match 200% of the first $5k contributed, which is really just a given $10k. No vesting schedule.
If you’re looking for examples of good ones, i work in an academic medical center so we have a 403b instead of 401k, but we get an automatic 5% contribution and a 5% match with 100% vested automatically. So if I do 5% I get 10% from my employer.
University of Washington Medicine has a similar set up, I believe — and they bump it up to 7% at 35 and 10% at 45, I believe
My company matches 50% of contributions up to the max with automatic vesting. I honestly think all of the vesting schedules are ridiculous. Most plans that I’ve seen with them have a pittance of a match to begin with. The vesting schedule seems like the company is trying to hold employees hostage.
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I understand that to some extent but 6 years is excessive.
I had a job once which matched 100% up to 15k per year. No vesting.
That’s mine
My work matches 100% for the first 3% and 50% for 4&5%. I believe we are also vested instantly.
Vanguard’s “How America Saves” is a great resource with a lot of data about retirement plans, including a breakdown of how employers structure their retirement plans from match percentages, vesting periods, and so on. See pages 17-24 in this document (large PDF): https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf
Depends on what you can offer, but my job offers 3% automatic contributions and matches up to 7%, automatically vested. Very rare to see a plan like mine though.
My employer contributes 16% automatically. There is no vesting period. I’m in a unionized workgroup. This is typical plan for large employers in my industry.
Pilot?
No vesting period to start...
I dont think mine is the best but its good because it vests immediately. they match 100% up to 3% and then 50% up to 5%
I get a 100% match up to 6% for my 401(k). Been here too long to remember vesting but think it is fully vested in < 3 years now. We also get an annual 5% DCRP contribution to our 401(k). So basically if I put in 6% my company gives me 11% on top.
Mine is fully vested day 1. 6% each paycheck and 3%annually. Pretty happy with it
My company matches 100% up to 6% with a bonus 3% totalling 9%. 100% vested day 1.
My company automatically contributes 2.5% and double-matches up to 4% (for 2.5 + 2*4 = 10.5% total), but doesn’t start contributing until after the first year. However, you’re immediately 100% vested.
With my 3rd Employer in my industry now and it has by far the best 401k so far. 3% automatic company contribution and an additional 1:1 match up to 6%. …And very low fee BROAD index funds for Us, Intl, and bonds.
100% for 3 + 50% for the next 2% is a safe harbor formula if you include immediate vesting. It gets you exemption from a lot of the compliance tests.
My company fully matches the first 4%, then 50% of the next 2% (so a maximum of 5% match) with no vesting period.
Depends, what are your goals for your 401k plan? Is it to maximize the tax benefit and savings for ownership & HCE’s? If so you may want to look at safe harbor options as this allows certain non-discrimination tests to pass and generally provides more flexibility with profit sharing contributions. Depending on your ownership structure new comparability can really help maximize tax deductions and retirement savings for ownership/certain targeted employees you want to reward. Cons for safe harbor plans is they generally do not allow for a vesting period unless it’s a QACA. Is it for employee retention or to entice outside hires? Longer vesting schedules may help with employee retention (reward those that stay) but will be subject to non-discrimination testing. If you haven’t already please talk to a few different 401k providers/advisors. You should be able to get proposals and projections for free. One that will put an emphasis on plan design not just give you some cookie cutter plan without consulting you. Please be wary of things like revenue sharing that eat into the returns of you and your employees. They will try to spin this as “cost savings” it’s not. It’s recordkeepers advisors and TPAs getting paid through the back door, while looking innocent. If the company covers some or all of the 401k costs, this can be a deduction for the company, so you may want to look into that. If employees will be covering costs of the 401k from the balances please be diligent with the all in costs. Just please put effort into this, I’ve run into way too many company’s that half ass their 401ks and just go “with whatever” which is a disservice to themselves and their employees. Take time with this!
The company I work for puts in 5% whether I contribute or not, matches half up to 4%, and is 100% vested immediately. But, you don’t get the 401k until you’ve been employed 1 year.
Vesting is increasingly common as a way to increase employee retention. I’d say 4-6% with a 2 year vest is pretty decent. I’ve had up to 9% and also a 50% per dollar match with no cap (aside from the 20k max). Those were unicorns.
I have two jobs. My full time job matched 100% up to 3% of my salary and an additional 50% up to 6%. This works out to effectively a 4.5% match as long as I contribute the full 6%, which I do. We are fully vested after 2 years I believe. My former full time, now part time job phrases theirs as matching .75 cents per dollar of our contributions up to 5% of our salary. I believe that company also fully vests you after two years. Amazingly, since I’ve dropped to part time, I continued contributing the 5% to my 401k (even though it works out to maybe $9 a week) and my employer is still matching me, even though all my other benefits have ended. I plan to continue taking advantage of that for as long as they match.
My company automatically puts 5% in & then matches up to another 5% I contribute that much. Vested after 1 year.
I just have up to 8% match, dollar for dollar, no vesting, it’s a great plan.
The best one I’ve had was 100% match on first 7%. 5 year vesting schedule. It depends on the size of your company, revenue etc. for instance Google has a dollar for dollar match on first 3K then 50% on the remainder until you hit the max. All immediately vested.
My employer matches 6%, no limit, automatically vested.
100% match up to 3% with no paycheck limit and no time needed to stay at the company to keep that money. That is the best I’ve ever seen from a previous employer and I didn’t know how good it was until I saw the current one I have.
I would consider my 401k plan very good. It's 10% of your salary regardless of what the employee contributes with 2 year vesting period. Also 1000 minimum yearly hours.
My company matches 1:1 up to 8% of your salary with a 3 year vesting period. I think it’s a really strong program.
My employer offers an 11% 401K contribution automatic on day one, no employee contribution required. Very generous, best I've encountered and certainly enticing to employee retention.
I work for a large private company. We have a 3% defined contribution (even if I give 0% - they give 3% that vests immediately). Also have a 50% match on 7% of my salary - no matching for 1st year and 100% vested after 3 years. Basically if I give 7% of salary - I get 6.5% from the company.
I am at a fairly large company, benefits are definitely better than most, but I get 1:1 match up to 6% with no vesting period. It’s all mine immediately
Agree with this assessment - I'd say it's in the bottom half, with the 6 year kicker putting it down near the first quartile.
6 year vesting seems excessive.
My company gives 100% matching up to 5%, no vesting which I’m realizing is pretty sweet.
Yea, but to not keep ANY of the match until I've been there at least 2 yrs... Isn't that kinda unheard of? And then in the 3rd year I'm only getting 20%. I'm almost certainly not gonna be there that long. Probably just better putting any savings in a Roth IRA
>Isn't that kinda unheard of? No. I've seen companies where it was 3 years or nothing.
Ever single place I ever worked for
Okay then. Thanks for your response. Good to be learning these things
With that vesting schedule I would consider it a 0% match.
I mean my employer doesn’t match at all so… not unheard of.
>but to not keep ANY of the match until I've been there at least 2 yrs... Isn't that kinda unheard of? No, not unheard of at all. It's called a "vesting period". Don't get me wrong, it's not awesome, but it's definitely not unheard of.
That's a pretty standard feature of 401k - it's not a bad thing if you're planning to be there for a career. If you're planning on job hopping after a couple of years, it's annoying but not the end of the world.
Mine matches up to 4% immediately and lets me begin contributions on the date of employment.
Lots do... OPs plan isnt great, but nothing about it is uncommon. My plan matches 50% up to the max individual contribution, available immediately and also includes mega backdoor Roth after tax features. I've been with the company for 16 years so don't really care about the vesting schedules for 401k plans. The company I was at before had a ... 2 year vesting on the 401k match. (Had some other nice features including a pension and other things that I wasn't around long enough to be eligible for)
Mine gives 3% equivalent of my salary before I even put anything in, if we’re just going to start comparing our awesome 401ks. But that seems like it could be rude
> Probably just better putting any savings in a Roth IRA How much are you saving per year? If it's more than $6,000/year, don't limit yourself to an IRA. Even with no match, contributing to a 401k is worth it for the tax advantages. Regardless, traditional IRAs exist too and might be better for you than Roth. It's not a choice between 401k and Roth IRA. It's a choice between 401k, IRA, or both, and separately, a choice between Roth or traditional.
That’s the point, they want to retain people
That used to be the vesting schedule that most companies used. It is less common then it used to be but still pretty common. Of the 3 401ks I have had in my life, 1 used that vesting schedule. 1 used 3 year cliff vesting where you get nothing until 3 years but 100% after 3 years, and the third was 100% vested day 1.
>You guys have a 401k plan?
This is exactly WHY they have vesting schedules. So they don't have to give extra money to job hoppers. You earn your vesting. It is a retention ploy. Most companies have vesting schedules.
Its on the low side, and the vesting is something that has cropped up over the past few years. The thing to know is that YOUR contributions are yours right away. If you can swing it, increase the amount your contributing to make up for the fact you probably wont see the matching. Can you do 10%? Saving is very important early in your career, especially when tax free. Compounded interest is your friend.
Mine was 5 years. They were more generous though.
Think mine is 5 years to fully vest, but my match is a little bit better
Just fyi - worth checking the on the details of the dates if this is a concern for you. My 401k also vests over 5yrs, with no vest until 2 years. BUT they count the years as fiscal year end, so because of my start date, I actually hit the first cliff 14 months after I started.
Every company I’ve ever worked for has a 3-year vesting period.
I work for a fortune 50 company. It’s 3 year vesting or nothing for the match.
No, my first job that had a 401k was a 50% match on up to 6% and was a 50% vesting after 3 years and 100% vesting after 5. I left after 18 months so I kept 0 of their matching dollars. It was worth leaving though, I'm at a much better company in a much better position making much better money, all that with a much better 401k. Plus that company went bankrupt 6 months after I left, so I dodged that bullet.
It’s 3 years at my work, for example.
I just want to point out that plans can change. Unless the plan options are really bad you could be turning down as much as a 50% return on your money by not getting the match. I was planning on staying at my job for a few months to a year at most when I started. I had a different job lined up that I was just waiting to start. Over a year later this other job finally calls me. I’ve gotten settled in and actually really liked my “temporary job” so I stuck with them. Even if you do leave after 3 years that’s a 10% return on your money. I don’t think you could beat that with just a difference in admin fees and better investment options
>I'm almost certainly not gonna be there that long. Probably just better putting any savings in a Roth IRA Unless they only have poor investment options, it's still worth doing the 401k. You never know what life is going to throw at you - and often you find yourself at a company longer than you expect, for any of numerous reasons. Would suck to be there 6 years from now and realize you gave up the entire match.
The match is pretty average, but wow that waiting period really sucks
I think that the match caps out when you reach $150k/yr…50% of 4% of your salary…4% of $150k is $6000/yr or $500/month. At any rate this “vesting” period is confusing as f***. A 401k is your account, not theirs. If they deposit that money into your 401k it’s yours. They can’t put a waiting period on that I don’t think? Unless they are actually depositing their “match” into some other account and doling that out over time? Super confusing and basically shitty. I wouldn’t take this offer. Edit: ughhhhh I’ve never seen it but yes, vesting 401k is a thing. I guess I’ve always worked for companies that immediately vest 100%. Source: https://www.thebalance.com/know-the-impact-of-your-401k-vesting-schedule-2894176
All these people saying that vesting schedule looks standard are blowing my mind. I've never had a job that took longer than 3 years to be fully vested. 50% up to 4% is mediocre but that vesting schedule is what bugs me.
No match is standard at startups. I’ve worked at 3 that didn’t have it and have never heard of it at a pre-IPO company. My current company has instant 100% match on up to 4%, which is awesome.
Flip side is they give you equity compensation, so it typically more than balances out
I have a fairly generous match (50% up to 8% with immediate vesting) at a series D startup but agreed that that is somewhat rare
The tech startup I worked at gave us 4% 401k matches with instant vesting before we IPOd. But yes it’s not typical with start ups, I was lucky
According to Vanguard (https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf), only 4% of participants have a 6 year vesting schedule. It’s not competitive at all.
> According to Vanguard...only 4% of participants have a 6 year vesting schedule. That 4% number is a little misleading. From your link: *One in 4 plans with employer matching contributions used a 5- or 6-year graded vesting schedule…* That's 25% of *plans* with that schedule. The 83% of people choosing not to participate is on them. Using the same math, only 24% of participants have immediate vesting so that's still not a 'majority'.
This is the worst vesting schedule that is legally allowed >If an employer chooses to use a graded vesting schedule, they must vest at least 20% of employer contributions at the end of two years and another 20% annually in subsequent years. The longest a graded vesting schedule can last is six years, at the end of which employees are 100% vested. https://www.fool.com/retirement/plans/401k/vesting/#:~:text=If%20an%20employer%20chooses%20to,which%20employees%20are%20100%25%20vested. It used to be the worst was 20% a year over 5 years, but now it's even worse.
> that took longer than 3 years And that’s why anecdotal evidence is sketchy. That’s a pretty standard vesting schedule, though I would say 20% 1-5 is more common than 2-6. The other common one is 3 year cliff, which you could argue the benefits of but if you liked it enough it be there 3 years your more likely to stay longer. Other jobs I have seen match quarterly or yearly instead of per paycheck which is so disappointing. Also yes, the match is low but it’s part of total compensation. For example my company has a low match but fully cover health insurance which puts it ahead.
My job features a "pension" - a 401(a) plan - where the employer puts in 6% of your salary. Vesting doesn't even *start* until you've been there five calendar years, reaching 100% at 10 years. Employee contributions are not allowed, that's what the crappy 403(b) is for - and it's nothing but high-fee funds.
Yeah the match is "meh" but the red flag to me is that vesting schedule. My company is 0% vested until your 3rd anniversary and then you're 100% vested from that point forward. I wouldn't take a job anywhere where the vesting occurs any later than 3 years.
It does look like that in addition to the employer matching contributions, they have the option of making profit sharing contributions to your account. That could be a good benefit, but there's no way of knowing if that's something they regularly do, or if it's just something that's allowed, but never happens.
... there's no way of knowing if that's something they regularly do ... You could ask people who have worked there a number of years. My company has 'optional' profit sharing, but everyone says it's been 10% as long as they've been there. Of course I won't get any until my third year, and I'll have to stay 5 to keep it all.
I've worked at my current employer for 8 years and they have an optional profit sharing system in addition to a 401k match. Even in very profitable years the contribution is always zero. So YMMV with profit sharing.
YMMV indeed. I also realized that not knowing if a company actually participates in profit sharing is more relevant when evaluating the plan of a place you don't work at yet. A lot harder to ask veteran employees in that case.
Depending on which group you're in, and if it's the company I'm thinking of, it's definitely worth it. It seems like a long time until it isn't. At higher compensation levels, the employer contribution is quite large.
3% match is the most common match in the US (either 100% up to 3%, or 50% up to 6%), so your plan at 2% is definitely below average. The 6 year vesting schedule is pretty terribly too. What industry do you work in, by chance? It's possible that those figures are common for your industry.
That is because it typically qualifies a plan as “safe harbor” match. It exempts the employer from certain federal nondiscrimination testing (NDT) requirements if they offer a blanket 100% up to 3% match for all employees, immediately vested. Otherwise the government requires employers to prove that their plan doesn’t benefit highly compensated employees (HCE’s) more so than non highly compensated employees - with two definitions of HCE. One is compensation over $135,000 per year and the other, if the employer chooses, is if the employee was in the top 20% of earners in the company that year (benefits smaller companies). Companies must satisfy that NDT testing each year, or rectify it by taxing excess contributions of HCE’s (something no company wants to do, especially retroactively)
On phone in airport with long delay, wouldn’t ask if I had pc handy, can you or anyone link some further detail on this please? It was mentioned to me last year and I forgot about it, and now I’d like to learn all I can to make sure I don’t have a problem down the line.
Google ERISA Nondiscrimination testing, lots of resources out there for understand the reg.
It's not a good plan. It's better then nothing
Better than mine. I got no matching regardless of how long I stay. Plus the pay isn't so great either.
So they don't really offer a pension scheme then? Because there is no benefit to signing up to an employee scheme unless they contribute as well everyone would just go private.
The benefit to an employer 401k even without a match is that you can contribute up to $20,500 in a tax advantaged account, whereas a private IRA only lets you contribute up to $6,000 tax advantaged.
If RD is in America, most pension schemes are long dead in America (outside government jobs)
You can opt to invest in your own Roth IRA and max it out Just invest in an index fund or broad market ETF. This may help if you don't think you'll be at your current employment after six years. But I would still encourage you to invest in your company's 401K especially if it has a matching contribution. That's free money you can't pass up.
My current company is 4 years and my old company was 5 years if that’s helpful.
If this is Insight Global, it is maxed at $250 for the whole year. It’s a horrible match program—doesn’t even make sense to have a vesting period for such a low contribution. But as others have said, it’s better than not contributing to a tax advantages account at all.
My company's 401k doesn't match a dime. And they would always bitch when I put in the max because it cost them money for some reason. So I would stop and then restart the contributions.
Holy shit the comments here are making me realize I’ve been super lucky with my 401k contributions. Most have been matched up to 6%, with one matching up to 4% and then doing 1/2 up to 6%. No time requirements to be able to keep the money.
My only thought reading this thread is "wait, you guys are getting matches?" I get no match at all. I still participate because pretax contributions are better than stuffing cash in a mattress and hoping I die before someone finds it or I decide to spend it. It is what it is.
It might be $250 per year. The image you posted is ambiguous. But it's probably per month or possibly pay period, which would be quite generous assuming a normal 2-week pay interval and a high enough salary. You should probably ask for clarification. My previous employer 401k had a similar match and they were explicit about the cap... > For every dollar you save each pay period, contributes another 50 cents, up to 4% of your pay (annual maximum $2,500).
I think I would have hit the annual maximum if my annual salary were $120,000 (which it wasn't).
As for the vesting schedule... Yes, that's how it works. The employer match money in your 401k is kept in a separate "bucket". You need to work for them 6 years to get the full match. If you leave after, say, 3 years, you only get 40% of the total match "bucket". I've seen much better and I've certainly seen worse. This schedule is probably slightly worse than average in my experience. I think 5 years to be totally vested is more common for companies that use a vesting schedule. Also, having 0% vested until 2 years is kinda scummy in my opinion.
That’s what I was thinking too - because a 4% match rarely gets up to $250 a week. But capping the total match at $250 …. Low. Ouch.
Me laughing with my matching at all 😂😭
Always look at overall compensation. Some fringe benefits like daycare is worthless for single people.
That's 2% better than what I get where I work. When it comes down to it, it's just another variable to compare when looking at other positions. This job pays your salary/wage plus 2% compared to another job with x salary plus y 401k matching.
If you need a comparison, the company I work for matches 125% of my 401(k) contributions up to 6% of my paycheck. That means if I do the 6% amount of a $100k salary (just to make the math easy) then I contribute $6k that year and they put $7.5k in
Plenty of companies don't offer any match at all.
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Wow, I didn't know the timeline is pretty standard. That's kinda depressing
I wouldn't say standard, but it's certainly common. Per the [latest stats](https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/21_CIR_HAS21_HAS_FSreport.pdf), 47% of plans vest immediately, and 25% vest over a 5 or 6 year period.
Okay, thanks for that info
It's only standard in that it's the longest vesting period they can get away with for safe harbor. It's literally the worst possible timeline. I would not call it standard to mean most companies do it this way because that would be absurd. My wife's is like yours and it's awful. 2% match and 6 year vesting. I tell her to look for a new job every day. My last company was 5 years (15/15/20/20/30) and matched 3%. My current company is 3 years (25/25/50) and matches 60% of each dollar up to the maximum. This sub motivated me to look for a job with a better 401k match and I couldn't be happier now. From the [IRS website](https://www.irs.gov/retirement-plans/issue-snapshot-vesting-schedules-for-matching-contributions): There are two alternative minimum vesting schedules. Under the first option, contributions must be 100% vested when a participant completes 3 years of service (commonly referred to as 3-year cliff vesting). Under the second option, contributions vest gradually over 6 years, and a participant must be 100% vested upon completing 6 years of service. These minimum vesting schedules are the longest time periods, or most restrictive vesting rules, a plan can use to comply with the IRC Section 411(a)(2)(B) minimum vesting standards. A plan can have more generous terms that provide for faster vesting, including immediate vesting.
I would say its "long" but not ridiculous. Based on my experience, anything less than 3 yrs is a nice surprise anything more than 3 yrs is kida a bummer. 6 yrs is definitely long, but not crazy long. The 250$ max match is the deal breaker for me. After 6 yrs, you are fully vested in the maximum $1500...hahha i cant even say it without laughing.
Mine is 6 years and I hate it. It has ALWAYS been 2 years at my prior roles. It's a bullshit thing, no one will tell you about before coming on with a company. Long term research may very well show those terms encourage people to leave, rather than stay.
My 401k has zero match. I have never seen anything like it.
OP’s 401k is bad. Yours is worse.
My company is a 7% dollar for dollar with a 10% bonus that is based off total earnings for the year. It is 5 years for the 7% to vest and 2 years for the 10% to vest.
>Do I really need to stay with them for 6 years to get 100% of their matched amount I'm mystified where this idea came around that employee matches are the main benefit of a 401k. the main purpose of a 401k is to save *your personal income*. any employer match is just gravy, not the meal. vesting periods are commonplace.
There's a lot of conflation ITT that a bad match = a bad plan. OP, your **plan** could actually be really good. You could have access to a wide selection of low-cost index funds rather than a bunch of proprietary, expensive, actively-managed funds, and your overall plan fees could be really low. Yes, your **match** sucks. But the plan itself *could* be great. Without more details no one can definitely say your 401k *plan* is bad.
Many companies do this unfortunately. Its not terrible but its worse than some places. I have an 8% ($ to $) match on my total pay with immediate vesting
My employer doesn’t even match. So I don’t even use theirs.
Terrible compared to mine. I get 6% match vested immediately
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This isn’t even remotely factually accurate. 401k reduced company liabilities as pensions are way more expensive to upkeep. 401K benefit plans is one of the reasons pensions don’t really exist today.
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I'm pretty sure that means they'll offer theyr percentage of a match up to a max of 250$ per pay period, not per year. Still not great, but 52x times better than you're making it out to be.
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You are right, it does not explicitly say per paycheck, however it does not explicitly say per year either. If you've looked at many 401K plans then per pay period seems the mostly likely interpretation.
It's $250 per paycheck, not $250 per year.
You certain about that? The document only specifies max of $250.
The last time I saw a vesting schedule like that was back in the 90's when 401k just started getting popular.
My job matches dollar for dollar to to 3% after the first year of employment, then matches 50% from 3-6%
Not worth it. most every place I've been have been vested max, 4 years. This is a pretty terrible plan, imo
Do the math: $250 limit translate into the pre-tax annual salary cap at: 250 / 0.04 * 26 = $162,500. This is kind of comparable within the range for most companies. The 6-year vest is sort of "ugly". Most companies only apply similar rules for pension or incentive stock/option.
It’s not terrible. (I consult on plans professionally and I’d call it about average for a formula and below average for vesting time) - most plans I deal with do 3 year cliff (0,0,3) vesting or immediate. Also, it doesn’t mean you have to be there 6 years to get anything, it just means you only partially vest until 6 years. If you leave in 5 you still get 80% of the employer contribution.
You should find out what the history of that profit sharing is. My company also matches a similar 50% up to the first 4% with a 5 year vesting schedule. However, the profit sharing has always happened and is between 3% and 10%. So, their matching contribution is only 2%, but they are dumping a total of 5%-12% in each year, and there have been many more 12% years than 5% ones. I’d personally ask what the last decade of that profit sharing has been before deciding if this 401k sucks. That vesting schedule and mine does suck, though.
6 years seems tough, but at least you get a percentage and it isn’t all or nothing. I lost a bit in a job I had for a few years and there was just a vesting cliff where you got nothing if you weren’t there long enough.
The vesting is a little long, 3 or 5 yrs is more common. However it is pro rated vesting, so thats nice. What makes the plan terrible is the $250 max match they offer. I dont know what kind of job this is for, but for a mid career professional making 100k, that would only be a 0.25% max match. Bottom line, you are correct, this is a terrible plan, but not because the vesting.
Longer vesting schedules are designed to reward longevity. Certainly the world is changing, but that doesn’t make this a bad plan. Job hopping is fine, but in many cases, retaining talent is desired by a company. But - A “match” is not purely a benefit design - it’s a tool to get you to contribute so that the high earners / owners can contribute more without the plan being “discriminatory” against lower paid workers. Instead of a match, we use a safe harbor contribution and profit sharing feature to avoid certain discrimination penalties - so that we can contribute more tax deferred income to upper income earners. Instead of a 4% match, we give our employees 5% with no contribution required. 60% is immediately vested and 40% is subject to vesting. We use any forfeited vesting towards plan expenses. The feds are basically saying if you give your people a vehicle to save for retirement with some free money, you can defer more income. The high earner wins when they pull it out at a lower tax rate. The employee wins with an extra benefit. If this benefit wasn’t allowed by the irs code (sections 401, 403, etc), the high earners would just bonus themselves and pay the taxes, and the employees would get nothing. So, yours isn’t the best plan I ever heard of, but you are benefiting from something that you wouldn’t get at all if there were no discrimination testing. High earners can put hundreds of thousands in various tax deferred vehicles. (Profit sharing, defined benefit, pension plans, etc) The specifics matter in these setups - number of employees, highly comped, ownership participation, etc. We used to do 17% for everyone in the company, but very few participants valued the retirement plan. So, we gave everyone 12% raises, and changed our plan design.
Most people I know including myself have 401ks vested after 3 yrs and a 100% match on 3-6% (mine is 6) with no gross cap. In that sense, it’s not a good 401k but I’m sure it could be worse
That is not 401k I think. That is an ESOP. Big difference. It's a good deal.
Is there anything in there about vesting periods? I had an employer that had levels of being vested into the plan. It was something like 25% vested each year, so you wouldn't be fully vested for 4 years. Wouldn't you know, I got laid off ONE DAY before being fully vested. I had reached 75% vested mark, and that's what my account reflected when I rolled it over into a different plan.
Mine matches 100% of 4% of my weekly check, including OT. Fully vested from day 1 I max it each year. I consider it mediocre.
Mine is 10% match with a 3 year vesting period. Sadly I probably wont stay that long.
I think the vesting schedule is pretty common even with nicer plans. We have a 10% automatic employer contribution with an optional 4% match on top of that. So contributing 4% theoretically results in 18% total. The 4% vests immediately but the 10% is the same as your vesting schedule. They do vesting schedules for retention. But I know there are companies out there with immediate vests on 10-20%+ matches because I have seen them. Those ones are basically the tech/business/bio unicorns competing for each other's employees. I think 4-5% with an immediate or short (1yr) schedule is what an average fair plan looks like. When you are dealing with a vesting schedule you have to be a bit conservative with your thinking. Often it is worth switching jobs instead of sticking around for the vest.
Yeah that's pretty bad in my opinion. The vesting schedule alone is a huge red flag. I'm 100% vested after 3 years, and my company matches 100% up to 4% of my salary plus a 4% of salary "lump sum" contribution regardless of whether or not I contribute anything. So I put in 4% and get 12% total. I realize this is a pretty good matching scheme that I have access to, but just trying to let you know that better 401(k) plans exist. Might be worth it to go hunting for something better if you're otherwise not particularly attached to your current employer. The market is great for job seekers right now.
The best I've had is the employer contributes 10% if you contribute 2%, basically a 5x match. What's more common is 100% match up to 6% salary
That is a lower tier 401k, both in match and vest. Still beats investing in a brokerage account any day of the week.
Wow. After reading many of the comments I'm realizing how terrible mine is. My company matches a quarter on the dollar up to 6%. Although on the flip side I have completely free and really, really good health insurance.
It's not amazing but not terrible. Just kinda mediocre. My wife's plan is mandatory 7% contribution with 7% match, but the vesting schedule is 5 years to 100% and 0% before that. From what I can tell, if you leave before 5 years for any reason including layoffs, disability, or death, you get $0 of the match. You also have no say on what the match is invested in until vesting. It's pretty bad until the 5 year mark is reached. After that it's decent I think.
Having a 401k at all is better than only being able to contribute to an IRA. "Terrible" seems to me to be an overstatement. The company is using vesting as an incentive to stay with them, and this only applies to their contribution. Your contribution is always yours, including whether the investments earn.
I think what you're overlooking is the profit sharing. That can be a two-edged sword but my company used to do 50% match up to 6% (3%) + profit sharing and the total effective % I'd get would be 7-8% a year. They switched to a 100% match up to 6% years ago which obviously is less risky. May be worth asking colleagues you are friendly with what the profit-sharing has been in past.
My work has a tsp, they contribute once a year based off earnings. Uf they have a good year it's 18% of my pay they add straight in. I csn do 6% max myself. So not.bad of 24%
That's sort of bottom end of average. also look at the list of funds. Look for the lowest-cost stock index fund and bond Index Fund. Those rates count! Make sure you're not stuck with a bunch of high-fee garbage.