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I'm attempting to understand my 401k match and how much I need to contribute to maximize the match

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6

I pretty much put the entire question in the title.

As written, my company's 401k is as follows: "Your employer matching contribution is equal to 100% of your employee deferrals up to 1% of eligible compensation each pay period. Your fixed match is 100% vested immediately."

I get paid semi-monthly; each paycheck (before taxes) is $3,833.84 giving me a gross pay of $92,012.05. I've been contributing 2% of my paycheck but, I'm noticing that I'm only getting 1% employer match on each of my paychecks which leads me to wonder if I'm misunderstanding something about how the employer match and contributions works and how to hit the match of $920 - 1% of my gross salary. (For example, last check I contributed $76.68 and my employer match was $38.34)

As an addendum, I realize that 2% isn't much of anything but I'm currently trying to pay off my student loans (aggressively) and I simply want to hit the employer match and that's it. I realize that if I simply upped my contributions to 4%, I'd probably hit the match but why is that the case? Is there a piece of information I'm missing here?

united-states 401k contribution employer-match

share|improve this question

edited 5 hours ago

perennial_noob

317215

asked 7 hours ago

secondublysecondubly

1313

New contributor

secondubly is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  Your HR department may also be helpful in understanding how to maximize the employer contribution.
  
  – jpmc26
  2 hours ago
  

  
  
  
  

add a comment | 

6

I pretty much put the entire question in the title.

As written, my company's 401k is as follows: "Your employer matching contribution is equal to 100% of your employee deferrals up to 1% of eligible compensation each pay period. Your fixed match is 100% vested immediately."

I get paid semi-monthly; each paycheck (before taxes) is $3,833.84 giving me a gross pay of $92,012.05. I've been contributing 2% of my paycheck but, I'm noticing that I'm only getting 1% employer match on each of my paychecks which leads me to wonder if I'm misunderstanding something about how the employer match and contributions works and how to hit the match of $920 - 1% of my gross salary. (For example, last check I contributed $76.68 and my employer match was $38.34)

As an addendum, I realize that 2% isn't much of anything but I'm currently trying to pay off my student loans (aggressively) and I simply want to hit the employer match and that's it. I realize that if I simply upped my contributions to 4%, I'd probably hit the match but why is that the case? Is there a piece of information I'm missing here?

united-states 401k contribution employer-match

share|improve this question

edited 5 hours ago

perennial_noob

317215

asked 7 hours ago

secondublysecondubly

1313

New contributor

secondubly is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  Your HR department may also be helpful in understanding how to maximize the employer contribution.
  
  – jpmc26
  2 hours ago
  

  
  
  
  

add a comment | 

I pretty much put the entire question in the title.

As written, my company's 401k is as follows: "Your employer matching contribution is equal to 100% of your employee deferrals up to 1% of eligible compensation each pay period. Your fixed match is 100% vested immediately."

I get paid semi-monthly; each paycheck (before taxes) is $3,833.84 giving me a gross pay of $92,012.05. I've been contributing 2% of my paycheck but, I'm noticing that I'm only getting 1% employer match on each of my paychecks which leads me to wonder if I'm misunderstanding something about how the employer match and contributions works and how to hit the match of $920 - 1% of my gross salary. (For example, last check I contributed $76.68 and my employer match was $38.34)

As an addendum, I realize that 2% isn't much of anything but I'm currently trying to pay off my student loans (aggressively) and I simply want to hit the employer match and that's it. I realize that if I simply upped my contributions to 4%, I'd probably hit the match but why is that the case? Is there a piece of information I'm missing here?

united-states 401k contribution employer-match

share|improve this question

edited 5 hours ago

perennial_noob

317215

asked 7 hours ago

secondublysecondubly

1313

New contributor

secondubly is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

share|improve this question

edited 5 hours ago

perennial_noob

317215

asked 7 hours ago

secondublysecondubly

1313

New contributor

secondubly is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

share|improve this question

edited 5 hours ago

perennial_noob

317215

asked 7 hours ago

secondublysecondubly

1313

New contributor

secondubly is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

edited 5 hours ago

perennial_noob

317215

edited 5 hours ago

perennial_noob

317215

asked 7 hours ago

secondublysecondubly

1313

New contributor

secondubly is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

asked 7 hours ago

secondublysecondubly

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2 Answers
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11

The key clause is this: 1% of eligible compensation each pay period

So if you are hired mid year, you would only be eligible for 1% of the remaining paychecks. Alternatively if you contributed 19k the first paycheck of the year, you would only receive 1% of 1/26th your pay.

So if you contribute 10% of your pay, you will still get $38.34 in match. One percent the same. One percent is what you need to contribute to maximize your match. It is not the greatest matching plan, but better than others.

In your case, I would recommend putting this at 1%, and paying down your student loans. And really keeping it at 2% would not make much of a difference.

Good work on paying down your loans.

share|improve this answer

answered 7 hours ago

Pete B.Pete B.

53.1k13113168

• 
  
  
  

  
  4
  

  
  
  
  
  
  

  
  
  The description, from your employer, is surprisingly well written.
  
  – Pete B.
  6 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  I didn't want to write an answer because @PeteB. covered it. I only wanted to point out that hitting the max 401k is different than contributing enough to match the employer contribution fully. So if the former also becomes a goal you have to contribute close to 20% (to make $19k a year as contribution), but your employer will still contribute 1%. So ~ $920 in 12 months.
  
  – perennial_noob
  5 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  That "each pay period" also means that you need to do some careful planning, since you need to be able to contribute 1% during each pay period. If you were contribute $19,000.00 in one pay period, then they'd contribute $190 during that pay period, but you would not be able to contribute any more for the year, because you've already reached your personal limit. So you need to schedule your contributions such that you are able to contribute at least 1% from every pay period.
  
  – Joshua Taylor
  2 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  Also note that some some employers actually do will "match up" or "top up" at the end of the year, looking at your total contributions and matching at that point, which would allow you to contribute, say, $19,000 in January, and still get a full 1% match on your salary. I have the impression that this is less common though. (I miss it; it's handy if you have a larger bonus in the earlier part of the year, since you can get your money into the 401(k) for a longer period of time.)
  
  – Joshua Taylor
  2 hours ago
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  @JoshuaTaylor I suspect most people can plan more easily around a 1% income decrease per paycheck than they can around a lump sum annual contribution of many thousands of dollars. ;)
  
  – jpmc26
  2 hours ago
  
  
  

  
  
  
  

 | 
show 2 more comments

2

There are generally two key percentages in a match program: the match ratio, and the match cap. The match ratio is how much money the employer will contribute for each dollar that you contribute. The match cap is the most you can contribute with it still being matched. Your company is telling you that the match ratio is 100%, and the match cap is 1%. So if you contribute 1% of your salary, it will be matched 100%. If you contribute 2%, the first 1% will be matched 100%, and the second will not be matched. With a paycheck of $3,833.84, your first $38.34 is matched, and everything else is not. So if you contribute $76.68, then $38.34 from you will be contributed, plus a $38.34 match from your employer, plus an unmatched $38.34, for a total of $115.02 being added to your 401(k).

share|improve this answer

answered 3 hours ago

AcccumulationAcccumulation

4,163416

add a comment | 

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11

The key clause is this: 1% of eligible compensation each pay period

So if you are hired mid year, you would only be eligible for 1% of the remaining paychecks. Alternatively if you contributed 19k the first paycheck of the year, you would only receive 1% of 1/26th your pay.

So if you contribute 10% of your pay, you will still get $38.34 in match. One percent the same. One percent is what you need to contribute to maximize your match. It is not the greatest matching plan, but better than others.

In your case, I would recommend putting this at 1%, and paying down your student loans. And really keeping it at 2% would not make much of a difference.

Good work on paying down your loans.

share|improve this answer

answered 7 hours ago

Pete B.Pete B.

53.1k13113168

• 
  
  
  

  
  4
  

  
  
  
  
  
  

  
  
  The description, from your employer, is surprisingly well written.
  
  – Pete B.
  6 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  I didn't want to write an answer because @PeteB. covered it. I only wanted to point out that hitting the max 401k is different than contributing enough to match the employer contribution fully. So if the former also becomes a goal you have to contribute close to 20% (to make $19k a year as contribution), but your employer will still contribute 1%. So ~ $920 in 12 months.
  
  – perennial_noob
  5 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  That "each pay period" also means that you need to do some careful planning, since you need to be able to contribute 1% during each pay period. If you were contribute $19,000.00 in one pay period, then they'd contribute $190 during that pay period, but you would not be able to contribute any more for the year, because you've already reached your personal limit. So you need to schedule your contributions such that you are able to contribute at least 1% from every pay period.
  
  – Joshua Taylor
  2 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  Also note that some some employers actually do will "match up" or "top up" at the end of the year, looking at your total contributions and matching at that point, which would allow you to contribute, say, $19,000 in January, and still get a full 1% match on your salary. I have the impression that this is less common though. (I miss it; it's handy if you have a larger bonus in the earlier part of the year, since you can get your money into the 401(k) for a longer period of time.)
  
  – Joshua Taylor
  2 hours ago
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  @JoshuaTaylor I suspect most people can plan more easily around a 1% income decrease per paycheck than they can around a lump sum annual contribution of many thousands of dollars. ;)
  
  – jpmc26
  2 hours ago
  
  
  

  
  
  
  

 | 
show 2 more comments

11

The key clause is this: 1% of eligible compensation each pay period

So if you are hired mid year, you would only be eligible for 1% of the remaining paychecks. Alternatively if you contributed 19k the first paycheck of the year, you would only receive 1% of 1/26th your pay.

So if you contribute 10% of your pay, you will still get $38.34 in match. One percent the same. One percent is what you need to contribute to maximize your match. It is not the greatest matching plan, but better than others.

In your case, I would recommend putting this at 1%, and paying down your student loans. And really keeping it at 2% would not make much of a difference.

Good work on paying down your loans.

share|improve this answer

answered 7 hours ago

Pete B.Pete B.

53.1k13113168

• 
  
  
  

  
  4
  

  
  
  
  
  
  

  
  
  The description, from your employer, is surprisingly well written.
  
  – Pete B.
  6 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  I didn't want to write an answer because @PeteB. covered it. I only wanted to point out that hitting the max 401k is different than contributing enough to match the employer contribution fully. So if the former also becomes a goal you have to contribute close to 20% (to make $19k a year as contribution), but your employer will still contribute 1%. So ~ $920 in 12 months.
  
  – perennial_noob
  5 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  That "each pay period" also means that you need to do some careful planning, since you need to be able to contribute 1% during each pay period. If you were contribute $19,000.00 in one pay period, then they'd contribute $190 during that pay period, but you would not be able to contribute any more for the year, because you've already reached your personal limit. So you need to schedule your contributions such that you are able to contribute at least 1% from every pay period.
  
  – Joshua Taylor
  2 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  Also note that some some employers actually do will "match up" or "top up" at the end of the year, looking at your total contributions and matching at that point, which would allow you to contribute, say, $19,000 in January, and still get a full 1% match on your salary. I have the impression that this is less common though. (I miss it; it's handy if you have a larger bonus in the earlier part of the year, since you can get your money into the 401(k) for a longer period of time.)
  
  – Joshua Taylor
  2 hours ago
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  @JoshuaTaylor I suspect most people can plan more easily around a 1% income decrease per paycheck than they can around a lump sum annual contribution of many thousands of dollars. ;)
  
  – jpmc26
  2 hours ago
  
  
  

  
  
  
  

 | 
show 2 more comments

The key clause is this: 1% of eligible compensation each pay period

So if you are hired mid year, you would only be eligible for 1% of the remaining paychecks. Alternatively if you contributed 19k the first paycheck of the year, you would only receive 1% of 1/26th your pay.

So if you contribute 10% of your pay, you will still get $38.34 in match. One percent the same. One percent is what you need to contribute to maximize your match. It is not the greatest matching plan, but better than others.

In your case, I would recommend putting this at 1%, and paying down your student loans. And really keeping it at 2% would not make much of a difference.

Good work on paying down your loans.

share|improve this answer

answered 7 hours ago

Pete B.Pete B.

53.1k13113168

share|improve this answer

answered 7 hours ago

Pete B.Pete B.

53.1k13113168

answered 7 hours ago

Pete B.Pete B.

53.1k13113168

answered 7 hours ago

Pete B.Pete B.

53.1k13113168

2

There are generally two key percentages in a match program: the match ratio, and the match cap. The match ratio is how much money the employer will contribute for each dollar that you contribute. The match cap is the most you can contribute with it still being matched. Your company is telling you that the match ratio is 100%, and the match cap is 1%. So if you contribute 1% of your salary, it will be matched 100%. If you contribute 2%, the first 1% will be matched 100%, and the second will not be matched. With a paycheck of $3,833.84, your first $38.34 is matched, and everything else is not. So if you contribute $76.68, then $38.34 from you will be contributed, plus a $38.34 match from your employer, plus an unmatched $38.34, for a total of $115.02 being added to your 401(k).

share|improve this answer

answered 3 hours ago

AcccumulationAcccumulation

4,163416

add a comment | 

2

There are generally two key percentages in a match program: the match ratio, and the match cap. The match ratio is how much money the employer will contribute for each dollar that you contribute. The match cap is the most you can contribute with it still being matched. Your company is telling you that the match ratio is 100%, and the match cap is 1%. So if you contribute 1% of your salary, it will be matched 100%. If you contribute 2%, the first 1% will be matched 100%, and the second will not be matched. With a paycheck of $3,833.84, your first $38.34 is matched, and everything else is not. So if you contribute $76.68, then $38.34 from you will be contributed, plus a $38.34 match from your employer, plus an unmatched $38.34, for a total of $115.02 being added to your 401(k).

share|improve this answer

answered 3 hours ago

AcccumulationAcccumulation

4,163416

add a comment | 

There are generally two key percentages in a match program: the match ratio, and the match cap. The match ratio is how much money the employer will contribute for each dollar that you contribute. The match cap is the most you can contribute with it still being matched. Your company is telling you that the match ratio is 100%, and the match cap is 1%. So if you contribute 1% of your salary, it will be matched 100%. If you contribute 2%, the first 1% will be matched 100%, and the second will not be matched. With a paycheck of $3,833.84, your first $38.34 is matched, and everything else is not. So if you contribute $76.68, then $38.34 from you will be contributed, plus a $38.34 match from your employer, plus an unmatched $38.34, for a total of $115.02 being added to your 401(k).

share|improve this answer

answered 3 hours ago

AcccumulationAcccumulation

4,163416

share|improve this answer

answered 3 hours ago

AcccumulationAcccumulation

4,163416

answered 3 hours ago

AcccumulationAcccumulation

4,163416

answered 3 hours ago

AcccumulationAcccumulation

4,163416