April 22, 2014
401K Employer Match Programs: Your employer will match your contributions up to a certain amount. It is “free” money. The company matches ONLY if you are making contributions. Your employer does not have to do this and can stop matching if it wants.
April 22, 2014
April 22, 2014
The COMPANY match:
$2,400 X .5 = $1,200
April 22, 2014
If you contribute 6% of your salary, how much will be contributed to
your 401k account every month including the employer match?
April 22, 2014
Your contribution is 6% of your annual salary:
$40,000 x .06 = $2,400.
The company matches 50% up to 6% of your annual salary:
$40,000 x .06 x .5 = $1,200
Total annual contribution is $3,600.
$3,600 divided by 12 = $300 contributed per month.
April 22, 2014
April 22, 2014
April 22, 2014
a) This is more than the 6% maximum the company so the limit is 6%
for the company match.
40,000 x .06 = $2,400 x .5 = $1,200 COMPANY match.
b) This is less than the 6% maximum the company will match 50% of
the 4%:
40,000 x .04 = $1,600 x .5 = $800 company match.
April 22, 2014
What is the total MONTHLY amount that will be contributed to the 401k
account including the employer match for a) and b)?
Your contribution is 10% of your annual salary:
$40,000 x .1 = $4,000.
The company matches 50% up to 6% of your annual salary:
$40,000 x .06 x .5 = $1,200
Total annual contribution is $5,200.
$5,200 divided by 12 = $433.33 contributed per month.
April 22, 2014
Your contribution is 4% of your annual salary:
$40,000 x .04 = $1,600.
The company matches 50% up to 4% of your annual salary:
$40,000 x .04 x .5 = $800
Total annual contribution is $2,400.
$2,400 divided by 12 = $200.00 contributed per month.
April 22, 2014
Jack's annual salary is $122,000. His employer matches his 401k
contributions at $0.65 for each dollar up to 7 percent of his annual
salary. Jack contributes $400 from each biweekly paycheck to his
401k account. What is the combined total of his annual
contribution and his employer's contribution?
What is the combined monthly contribution?
April 22, 2014
Jack's contribution of his annual salary:
$400 x 26 = $10,400. This is more than 7% of his salary.
The company matches 65% up to 7% of Jack's annual salary:
$122,000 x .07 x .65 = $5,551 is maximum the company will match
*** Jack's contribution is greater than the company's maximum match so he gets all of it.
Total annual contribution is $10,400 + 5,551 = $15,951.
$15,951 divided by 12 = $1,329.25 contributed per month.
April 22, 2014
Jack's annual salary is $72,500. His employer matches his 401k
contributions at $0.40 for each dollar up to 9 percent of his annual
salary. Jack contributes $25 from each weekly paycheck to his
401k account. What is the combined total of his annual
contribution and his employer's contribution?
What is the combined monthly contribution?
April 22, 2014
Jack's contribution of his annual salary:
$25 x 52 = $1,300.
1300/72,500 = 1.8% of Jack's salary.
The company matches 40% up to 9% of Jack's annual salary, but Jack
is only contributing 1.8%
$72,500 x .018 x .40 = $522 is the company match
Total annual contribution is $1,300 + 522 = $1,822.
$1,822 divided by 12 = $151.83 contributed per month.
April 22, 2014
How much of the company match (free money) is Jack giving up?
Maximum Company Match:
$72,500 x .09 x .40 = $2,610
Company match Jack received:
$522
2,610 - 522 = $2,088 of "free" money missed out on.
April 22, 2014
Jack's annual salary is $103,000. His employer matches his 401k
contributions at 60 percent for each dollar up to 7 percent of his
annual salary. Jack contributes $125 from each biweekly paycheck
to his 401k account.
April 22, 2014
Jack's contribution of his annual salary:
$125 x 26 = $3,250.
3,250/103,000 = 3.2% of Jack's salary.
The company matches 60% up to 7% of Jack's annual salary, but Jack
is only contributing 3.2%
$103,000 x .032 x .60 = $1,977.60 is the company match
Total annual contribution is $1,977.60 + 3,250 = $5,227.60
$5,277.60 divided by 12 = $435.63 contributed per month.
April 22, 2014
How much of the company match (free money) is Jack giving up?
Maximum Company Match:
$103,000 x .07 x .60 = $4,326
Company match Jack received:
$1,977.60
4,326 - 1,977.60 = $2,348.40 of "free" money miossed out on.
April 22, 2014