401k match info....

As you have said 401k plans are not for everyone...as they force each participant to become an investor advisor for their own money....and how many people really know how to invest money? It is hard to do, #### hard.

A lot of people make serious mistakes managing their 401k, but employers don't seem to understand that.

I had a defined benefit penson plan for 20 years and many people in the plan wanted to have control over the investment decisions, but with a DB plan the participants do not make any investment decisions, it is all left up to the employer that is funding the plan....if the employer makes a bad investment decision one year, they have to throw in extra cash the next year to make up for the investment loss.

So many people complained about the DB plan, that we eventually changed to a 401k plan in 2000....when the stock market crashed, everyone complained about the losses in their account...and some panicked and made some really bad decisions. But most did ok, but some did not.

With a 401k you have to decide your risk level up front, and then stay the course....but it is too tempting when the stock market goes up to put too much money into the stock market...there is a secret to investing in a 401k plan, and the plan sponsors sometimes don't repeat it often enough, and it is human nature to panick when the market is down or to get greedy when the stock market is up. (I am not telling you the secret fundamentals to investing in a 401k unless you ask)
You were already told them when you began your 401k or sometime during the first year when you had your 401k.

The EMPLOYER MATCH IS FREE MONEY that I would not otherwise get, so I can double my retirement by working for an employer with a 100% match to my contributions...suhweet deal....where else can you get such a deal? no where, cause who is going to give you free money???

So it is up to you to figure out how to manage your retirement money and the free money you get from your employer in your 401k plan....either you figure it out, or you hire someone to figure it out for you.

The market has recoverd mostly from the awful low that you referenced...and savvy investors can still make 5 - 6% annually with some funds, but not stock funds (bond funds have been performing that well = Pimco and Vanguard historical returns are available to anyone to see) ...a lot better than .02% from a CD.

And yet, anyone who relies on 100% of their retirement to be funded by a 401k are also doomed to a risky retirement. Your 401k should only be about 1/3 of your retirement funds. The other 1/3 should be your personal investments, that are adequately diversified to balance your overall portfolio...some real estate(buying a house), some CDs, cash value in life insurance, etc, to match your risk tolerance level. Most people simply do not save enough....eat out every night, buy a new car every 3 years, buy the latest electronic gizmo...you need to save at least 10% of your income every year....how many people are doing that? Not many, cause their credit card payments come due every month.

 

Who do you drive for? That is a good company match and a good return too. Do they have an annual dollar limit on the 4% they put in?

You are planning ahead to have that much going into your retirement fund...you would seem to be above the national average on saving.

 

What companies have you worked for?

I think a company matching the first 6% of the employee contribution is a fairly average level. Usually the company match is 50% of what the employee is putting in.

What seems to be the bigger variable is the annual cap the employer places on the employer match....some have a really low cap of $1,000 or $1,500 which to me is ridiculously low, and is common in retail and other sectors.

Thanks to all for sharing your info.