Eliminating 401(k) matches might actually be a savings boon

[Tandalayo_Scheisskopf]

BOSTON (MarketWatch) -- There is no free lunch. But there is free money. Or at least that's the case for millions of 401(k) plan participants whose employer currently matches their contribution to their 401(k). Unfortunately, that may soon change.

Some researchers are suggesting that employers can put in place automatic enrollment plans and eliminate their 401(k) matches without any adverse effect on participation or contribution rates.

http://www.marketwatch.com/news/story/eliminating-401k-matches-might-actually/story.aspx?guid={F7B2AB87-AD6B-4B5D-B52C-6705996C18C7}

And fucking is good for maintaining one's virginity.

[marmar]

1. Wow....Eliminate pensions, shift the burden of risk to the employee.....

.... then say, "well, you're completely on your own....And if the stock market tanks, well, you can always work until you're 80...unless we close our US operation and re-start it in Dubai."

:argh:

[liberal N proud]

2. That looks like the plan

Undoing all the years since the depression to keep a depression from happening again.

Some of the money these rich bastards could hoard is locked up in your retirement plans, pensions and 401K plans.

[lukasahero]

3. Read the article

"To be fair, this notion that employers will drop their matching programs is contrary to other published reports."

"What's more, those who eat, breathe and sleep all things retirement say reports of the death of employers' matching contributions are not only premature, but perhaps harmful. Indeed, the experts say that employers who abandon their matching plan in the wake of what some have called a "flawed" study -- the study examined only the experience of one company and extrapolated the results -- will find the cost far greater than the benefit."

[TooBigaTent]

4. Not all employers match, and not for all employees. The high-on-the-food-chain execs get it

while worker grunts do not.

As long as that system exists, unfairness is perpetuated. Better to have all employers do it or not.

[lumberjack_jeff]

7. There used to be "top heavy rules" for 401k plans.

Essentially, executives couldn't participate if the rank and file employees weren't. So, companies started matching employees pittance-for-pittance so that the executives cold save large tax-deferred sums.

AFAIK, those rules have been severely relaxed in the last 8 years.

[RaleighNCDUer]

14. And some employers only match after a certain time frame, which

allows for the employee to prove himself - that is, no matching contributions until after 3-5 years employment - thus saving the company from matching employees who are there less tan 3 years. Which for entry level positions means virtually ALL of them.

[Mike Daniels]

19. Speak for yourself

The non-profit I work for matches up to 5% from the date of hire for all employees who are on the 401K program.

[aspergris]

5. keeerist!

Matching 401k's are one of the best "bargains" out there ever for the average joe.

I wish my employer offered that. We've got some great bennies, but no matching

I tell people that if they don't max out their matched 401k they are simply throwing away money.

"some researchers" are idiots

[melm00se]

8. Bingo!

>>I tell people that if they don't max out their matched 401k they are simply throwing away money.<<

let's say that an employer matches $0.50 on a $1 contribution. I'd like anyone to name a high quality safe investment that will pull in an immediate 50% return on investment and that $0.50 immediately starts increasing as your 401k portfolio increases.

[aspergris]

13. yup

AND your money comes out pretax
So you get immediate 50% return (or 100% with 1:1 matching)

and if you are in a marginal tax rate of (for example) 30%, then it only "costs you" .70 or so for each dollar you invest, since it comes out pretax

[dawgman]

6. I get matched dollar for dollar up to 4%

it is one of the main reasons I chose my employer. If that were to go away so would I.

Employers would do well to consider the impact this would have on their ability to attract talent.

[lukasahero]

16. Read the article

It says almost exactly that.

[Phoebe Loosinhouse]

9. The match is the only thing that ensnares many into their companies 401K

Every single financial adviser says "Do you like free money? Then you're an idiot if you don't go into the 401K at least to the point to get the most from the employer match." And to some extent I agree with that BUT

The match is often in company stock. Could be great, could be awful - talk to the Enron people about that. Over time, you will have a disproportionate amount of your retirement savings invested in your own company's stock or at least that's what I found. I also found that within my plan, I could NOT move this employer match into another area, even the vested portion. I don't know if my company's plan was weird or unusual in any way, but that's how it was. Also sometimes the match is not as generous or large as you think it is. The fine print of the match - how much and when it's vested are critically important.

Another thing I have noticed - some company's 401K's have absolutely horrendous funds in them if you actually investigate the fund or family of funds that are being offered. You might be better off in your own self-controlled IRA where you are not inadvertently dropping change into a rathole. I see this in smaller businesses more than larger ones, where the "financial adviser" is the brother-in-law of the owner.

Also, if your account is not accessible online to monitor and make switches in a timely fashion, I would also avoid it.

And, of course, I personally think the stock market is a Ponzi scheme anyway and don't understand why all 401K's aren't required by law to offer good old government savings bonds to the more conservative out there.

[Alter Ego]

10. Great.

Guess I can kiss the extra $1500 my company puts in my 401K goodbye.

[lukasahero]

17. Read the article

Please?

[Terran]

11. State of Missouri

has actually increased its match recently. It used to be $25/month, now it's $35, as long as you contribute at least that much on your own.

I keep dithering about withdrawing from it though...I contribute $100/month and I could be using that money to pay off debt.

[Wcross]

12. My employer matches for salaried employees but stopped matching hourly.

It was part of the Union agreement, I believe they negotiated away the match for maintaining pensions for new employees. The salaried employees are still receiving a match but new salaried employees get a "lump sum" retirement plan rather than the pension existing salaried employees receive.

[OPERATIONMINDCRIME]

15. Makes Some Sense.

I've always been amazed that so many companies still do the matching even in the face of other rising costs. It's a huge gimme and personally I love it, but I see nothing logically that would infer that the practice is something that a company should be expected to do. In fact, I think it's a total gift. With the way the economy is, it doesn't surprise me at all that they're going to start evaluating the merits of doing that vs other things.

[lukasahero]

18. It's a write off

From David Cay Johnson's "Perfectly Legal":

"Using company stock to fund a retirement plan can bring a company tax-free cash, cut its taxes, make its finances appear stronger than they are and make executive stock options more valuable, at least in the short run."

Great book - I recommend it to everyone.