[USER]

I have a new job offer with base of $175k.
Looking at the benefits the 401k plan says

“For those actively contributing to their 401k plans, the company will offer a 50% match, upto 5% (subject to IRS limit).

Essentially, a 5% contribution to your plan is a 7.5% contribution when adding the company match”
I’m confused on how this’ll work. Can someone provide color pls ?

It’s not straight as me taking 7.5% of $175k is it?

The way I’m thinking is 50% upto 5% of $175k so 175k*5%/2 which will be $4375 + 2.5% of 175k =-$4375 so today – 8750?

I know I’m getting something wrong …?

[Matt]

You should clarify with HR if the 5% refers to the maximum of their match if you contributed 10%, or if it is the maximum of your contributions for which they match 50%.

My guess is the latter, unfortunately.

My last 3 employers have used similar wording, with 50-100% matching on the first 5% you contributed.

Above that there was no matching of contributions.

[Valerie]

If you add 10%, they will add 5% every pay period. It’s 10%/5% of the pay that pay period.

If you contribute every pay period for the year it will be based off the $175k plus whatever extra you had.

[Aura]

You need to put in 10% of your salary and they will add in an additional 5% to your 401k.

Be aware that a lot of companies do this on a paycheck by paycheck basis sobfor example if you max out your 401k contributions in October, you won’t get November and December matching. Read the fine print.

[Karen]

You need to contribute 10% to maximize your company match. So, if you contribute 10% they will match the full 5%.

[Lauren]

Sounds like nobody is sure whether the 5% is the max they will contribute (so you have to contribute 10% to get the full match) or whether they mean up to *your* contribution of 5% and theirs of 2.5%.

(I also don’t know.)

[Stacie]

If you’re making 175k, just max your 401k and you’ll get the max benefit.

Problem solved.

[Dave]

You should also see if they offer a “true-up” feature.
With some plans, you have to contribute evenly throughout in the year in order to get the maximum match; however, plans with a “true-up”

feature would allow you to front load your 10% contribution as early in the year as you want, and then they’ll give you all of the remaining matching funds as a lump sum at year end.

[Ed]

You put in $100, they match @ 50% so they put in $50.
This continues up to 5% of your salary, so as Karen stated you need to put in 10% to get the matching 5%.

The total contribution would be 15%.
After that they don’t match.

In my company plan, this was by each paycheck, so they won’t match more than 5% if some months you don’t contribute at a 10% rate, but other months you exceed it.

175k×5%= 8750 employer contribution
175k×10%= 17500 your contribution
8,750+17,500 $26250 total

[Brian K]

Wow y’all are a hot mess of bad information and OP is overthinking it.

You don’t need to contribute 10% to get the full match. For every dollar you put in they will put in 50 cents, until you have contributed 5% of your salary.

If your own contributions exceed 5% of your salary you will still get the tax benefits but you will not get any additional match money.

So, you make 100,000
And contribute 5,000

They will match 50% or 2,500 making your total contributions 7,500.

If you contribute 10,000 they will STILL only donate 2,500, making your total contribution 12,500.

[Kandi]

It sounds to me like 2.5% is the maximum your employer will contribute.
If you contribute 4%, employer will match with 2%.

If you contribute 5%, your employer will match with 2.5%
If you contribute 8%, your employer will match with 2.5%

You should clarify this with HR.

[Author]

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