Increasing my 401(k) Contributions to Avoid Leaving Money on the Table

//Increasing my 401(k) Contributions to Avoid Leaving Money on the Table

Increasing my 401(k) Contributions to Avoid Leaving Money on the Table

I mentioned about a month ago I would open my books a bit more so I can look back at my archives and understand where I came from.  In both my goals and objectives for 2011 and my halfway update for those goals I mentioned that I contribute the amount to my 401(k) which garners a full match by my employer.  However this has been a lie!  I just realized that the whole number I used to calculate this match was chosen  almost 3 years ago!  or put differently 2 raises ago…which leads me to the two points of this post…I have been leaving “free” money on the table!

Instead of just figuring out the exact amount and having to deal with this as the years pass I decided to pick another whole number that is much more than what I was contributing.  In the end I am just saving/investing!  Specifically, I increased my 401(k) contributions from $105 a paycheck to $175 per paycheck ($350/month).  I receive a very generous match, but not one that justifies my health insurance costs.

While I know that 401(k)s are often the most fee laden vehicles out there and that anything above the match may be more efficiently used elsewhere I am choosing to ignore that piece of information as I more focused on increasing my liquidity and the extra amount will not end up in a retirement account.

I am not sure if I should be happy about it, but FINRA recently released a report titled, “Why Leave Money on the Table – Make The Most of Your Employer’s 401(k) Match” that I am not the only idiot leaving free money on the table,

According to a recent report, 29.4 percent of 401(k) participants do not contribute enough to their 401(k) to receive their full employer match—with higher rates of foregone matches seen among younger workers age 20 to 29 (43 percent) and those automatically enrolled into an employer-sponsored defined contribution plan (41 percent). An earlier report showed that 40 percent of employees making less than $40,000 fall short of contributing the full extent of their employer’s match. Millions of workers are leaving money—free money—on the table.

Editor’s note: The report they are referring to was released by AON Hewitt.

 

When is the last time you increased your 401(k) Contributions?! 

By | 2013-09-26T14:57:19+00:00 November 17th, 2011|Qualified/Retirement|16 Comments

About the Author:

Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

16 Comments

  1. 20's Finances November 17, 2011 at 7:30 am - Reply

    I qualify in February (stupid 2 year qualification period)… but I will be putting in at the amount to get the full match. 29% sounds high on one hand, but then again, people aren’t planning for retirement as aggressively as they should.

    • Evan November 17, 2011 at 9:46 am - Reply

      I had to wait my 2 years also here! Before you shove money into a qualified plan make sure your non-qualified foundation is solid b/c once it goes in it is VERY expensive to take it out

  2. slug November 17, 2011 at 7:45 am - Reply

    Is there a reason you are allocating dollar amounts instead of a percentage? If you choose a percentage, it will always increase in dollar amt. should you get a raise.

    • Evan November 17, 2011 at 10:17 am - Reply

      I should have done it then, and I should have done it this time…I should have asked but my initial aversion to doing it this very smart way was my bonus. I didn’t know if they would then take that same percentage from my bonus which comes to me as an extra paycheck.

      • slug November 17, 2011 at 12:08 pm - Reply

        Do you have an HR aversion disorder? 🙂 All the things you are bringing up are completely reasonable questions to ask to your HR rep. Believe me I ask my rep much more difficult questions than these, and they seem happy to answer. It is their job you know.

        • Evan November 17, 2011 at 12:43 pm - Reply

          Not HR but I am pretty sure I am afraid of our office manager lol…seriously lol

          • slug November 17, 2011 at 12:45 pm - Reply

            Embrace your enemy. It will only make you stronger, and it might help your savings rate!

  3. Mike November 17, 2011 at 9:05 am - Reply

    I contribute the max % rate to get the full match. But by electing a rate I don’t have to worry about changing it because the dollar amount will automatically increase anytime I get a raise.

    • Evan November 17, 2011 at 10:42 am - Reply

      Does it take into account bonuses you may receive?

      • Mike November 17, 2011 at 10:59 am - Reply

        I’m not eligible for bonuses in my position so I’m not sure. As far as your bonus goes, you’d have to ask your plan administrator. Some plans include bonuses and others exclude them, depends on the plan document.

  4. Jenna November 17, 2011 at 6:06 pm - Reply

    I haven’t yet. But we can increase our retirement plans annually and I believe when we get raises too.

  5. JP November 17, 2011 at 7:41 pm - Reply

    Not at all surprised by the low numbers. The last time I signed up for a 401k, the company did little to no explanation just handed all the materials to everyone. Ended up setting a 15% contribution.

  6. krantcents November 17, 2011 at 9:04 pm - Reply

    Sometimes you can not contribute more because of limits on highly compensated employees. Under normal conditions, everyone should contribute more.

  7. Well Heeled Blog November 18, 2011 at 12:08 am - Reply

    I don’t get a match, but I’m still contributing every penny I can to the 401K. Tax deferral is good in my book.

  8. YFS November 18, 2011 at 3:10 pm - Reply

    I wish my employer offered a match. Unfortunately, they do not and I’m stuck in a situation where I cannot contribute the max to my 401k because Key employees are bound to no more than 2% contribution rate of the non key employees. I would get a huge paycheck back at the end of the year. My employer refuses to implement the safe harbor match also. So what I am doing is contributing after tax dollars to a taxable account.

  9. Amanda L Grossman November 19, 2011 at 7:50 pm - Reply

    Once a year or so I update my net worth into networthiq.com; it’s fun to see the changes from the last three years! Love tracking.

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