Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 27, 2016 6:34:53 GMT -5
Lots of net worth info on the boards these last few days/weeks, got me to checking, and thinking. I just hit 100k on my employers 401k plan (previous jobs are all rolled over into a scottrade account, plus have a scottrade roth and a vanguard roth, that I haven't really contributed to(roths) in .....oh.....years. I need the tax benefits of 401k more at the moment) When I went from my former job to the one I have currently, I had to wait a year to join the 401k, and when we were sold, new employer made us wait another year to join the 401k, just like a new hire - even though, lol, there is no match. Can't remember what I did those years, First time, I did max my roth, but that was all I could do for retirement - didn't do anything else that I can recall. Second time, pretty sure it was all absorbed into the Landrew........of daily living I suppose. With the new employer - no match - but after 2 years of employment with them (again, just like a new hire) got the ESOP as their version of retirement vehicle. And you must sell the stocks when you leave - quit, fire, retire, doesn't matter. You get the notice 10 months after the books close on the year on what you've got. So - in October, you get notice of previous calendar year's earnings (no idea what happens if you 'earn' the money, but quit in June). After 6 years, I think I only got it 3 times due to starting mid year and not getting credit for the first 6 months of employment towards the 2 years. So - 6k for 6 years. Pretty lame, in my opinoin. So anyhoo - every job change, and even those you don't control - like same job, new employer buys you - comes with a "lost year" for retirement savings. For me, the 401k tax benefits and the limits really encourage to push myself to put some aside and try to hit the limit. Without that, I don't try as hard, honestly. Wondering how much these lost years on the 401k effect others? How common is the 1 year wait? Seems a disservice all the way around, like they could limit the match if they want, but at least offer it to ees?
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alabamagal
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Post by alabamagal on Nov 27, 2016 8:33:54 GMT -5
I have started work at 3 jobs in the last 10 years. None have had waiting periods for starting in 401k. Two were big corporations and 1 was small (25 employee). Only wait was time to get paperwork done so usually contributing by second paycheck.
Current employer has automatic enrollment. Company contributes 6% as a retirement portion, then will match up to 4% if employee contributes 6%. So I consider it 10% match of my 6%. The only wait is that the 401k match portion vests after 2 years at company and retirement portion is 3 years.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 27, 2016 8:48:26 GMT -5
that seems much more reasonable! as usual - I find I get the shaft, lol!
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Deleted
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Post by Deleted on Nov 27, 2016 9:46:33 GMT -5
I've never heard of having to wait a year to start contributing. My company just has a vesting period for the match and when we were bought out and when I left for a few years and came back I was able to stay vested based on my past time there.
Of course, I've been with the same company since 94 so not a big sample but my ex job hopped a lot while we were married and he was always allowed to contribute right away.
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8 Bit WWBG
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Post by 8 Bit WWBG on Nov 27, 2016 9:48:00 GMT -5
I know it's frustrating feeling like you are clawing bit by bit, while others seem to swoop in every quarter posting another $100K milestone. Just keep at it. We may never hit the $750K by age 30 that some have, but we'll be spared a retirement of cat food.
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Pants
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Post by Pants on Nov 27, 2016 9:49:28 GMT -5
I've never had to wait to join 401k. I've had to wait to vest their contributions, though. And my current company also has a pension and that was 3 years till vesting.
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Tiny
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Post by Tiny on Nov 27, 2016 9:52:32 GMT -5
My experience is old... like 20 years... but when I switched employers back then I "negotiated" being able to contribute to the 401(k) ASAP like at my start date instead of my 1st year anniversary. They came back with letting me start after my 90 days "probation" period was over. And I accepted that. I tried to negotiate a match - or something (a one time lump sum?) - but they were adamant on no match - since they would be contributing to a pension plan I would eventually be invested in (I was entitled to that contribution amount if I left before I was vested). I wasn't getting a 'raise' in income with this job change - so I tried my darndest to maximize the 'benefits' I would get. Even without the tweaks I asked for (and got) The benefits more than made up for not having $$ in my paycheck. There isn't any "law" or "rule" that makes employers wait a year before they let employees sign up for a 401(k). My guess is delaying sign up - somehow saves the employer $$ or maybe paperwork.
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Deleted
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Post by Deleted on Nov 27, 2016 10:05:16 GMT -5
It's pretty sad that employers terminated their pension plans and then the 401(k)s they offer are so chintzy. I worked for insurance companies my whole career and they're one of the last places where you can get decent benefits. Chubb did change their plan a few years ago so that the company match was deposited in a lump sum at year-end and if you resigned on December 30 you didn't get it- but OTOH, DS works for an insurance company that still has a pension plan. I worked for one company that had vesting in the company match over 5 years (I made it), a couple more with immediate vesting, and a couple of small firms with no match and crappy investment options. I saved on my own anyway even with no tax advantage and no match. The real class act was the company I left in 2012. They acquired my previous employer and we were shut out of their pension plan, which they'd closed to new employees (and we were considered to be new employees for that purpose). Those ineligible for the pension plan got 6% deposited into their 401(k) regardless of whether or not they put in a dime of their own. They then matched 100% of the first 6% we put in, vested immediately. Now THAT is an employer that didn't hog the savings from terminating the pension plan and instead shared it with the affected employees. I had one coworker who'd immediately take out the 6% when it was deposited in April and spend it, even though he got taxed up the wazoo for it.
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gooddecisions
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Post by gooddecisions on Nov 27, 2016 10:28:55 GMT -5
I've been at the same company 15 years. When I started, you could enroll in the 401(k) immediately, but they didn't match up to 5% until a year. My only lost year is the first year, because I wasn't making much money and didn't enroll until they started matching. 6% of my salary would have been about $1300. Oh well. My only misfortune was not finding a higher paying job out of college so that my match and my contributions during those early years was more substantial. Oh well again.
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Deleted
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Post by Deleted on Nov 27, 2016 11:06:33 GMT -5
I've been lucky in that I have had a 401k with a match since I was 20. My first company limited my contribution to 15% of pay the first couple of years but besides that there have been no restrictions.
It is incredibly unfair that some people have 401k gaps, I wish they would get rid of 401k's and allow everyone the same contribution limits into an IRA each year.
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Deleted
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Post by Deleted on Nov 27, 2016 11:11:10 GMT -5
I really have only worked retail besides being a teacher. Macy's let you enroll immediately and vested over five years. However, they closed our store so we vested immediately at that point and our cash-balance pensions were paid out as well. I remember receiving about $100 for the pension, which fellow employees said was silly to rollover. They were so excited about getting their pensions and 401k balances! They didn't understand these would be taxed. The other retail store, Parisian's, had two periods to enroll. If you worked X number of hours in the first X number of day (can't remember the specifics), you could then enroll with the next paycheck. Otherwise, you had to wait a year. It was set up basically to make it difficult for part-time employees to enroll at first, which is understandable. The turn-over is huge. I worked every hour I could get to meet that first threshold and did. They tried to tell me at first that I didn't, but I just said, "Count again." I was probably the only part-timer who ever cared. My "lost years" are the years when I didn't realize that personally saving for retirement was important. We only saved for my then-husband's retirement. I got part of his in the divorce, but that's not the same thing. Of course, it is partially his fault because I wanted to start a "spousal IRA" for years, but he said we couldn't afford it and didn't need it. TheHaitian really is showing love to his wife in insisting that she also save for retirement. No one knows what the future will bring.
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tskeeter
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Post by tskeeter on Nov 27, 2016 11:12:00 GMT -5
Lots of net worth info on the boards these last few days/weeks, got me to checking, and thinking. I just hit 100k on my employers 401k plan (previous jobs are all rolled over into a scottrade account, plus have a scottrade roth and a vanguard roth, that I haven't really contributed to(roths) in .....oh.....years. I need the tax benefits of 401k more at the moment) When I went from my former job to the one I have currently, I had to wait a year to join the 401k, and when we were sold, new employer made us wait another year to join the 401k, just like a new hire - even though, lol, there is no match. Can't remember what I did those years, First time, I did max my roth, but that was all I could do for retirement - didn't do anything else that I can recall. Second time, pretty sure it was all absorbed into the Landrew........of daily living I suppose. With the new employer - no match - but after 2 years of employment with them (again, just like a new hire) got the ESOP as their version of retirement vehicle. And you must sell the stocks when you leave - quit, fire, retire, doesn't matter. You get the notice 10 months after the books close on the year on what you've got. So - in October, you get notice of previous calendar year's earnings (no idea what happens if you 'earn' the money, but quit in June). After 6 years, I think I only got it 3 times due to starting mid year and not getting credit for the first 6 months of employment towards the 2 years. So - 6k for 6 years. Pretty lame, in my opinoin. So anyhoo - every job change, and even those you don't control - like same job, new employer buys you - comes with a "lost year" for retirement savings. For me, the 401k tax benefits and the limits really encourage to push myself to put some aside and try to hit the limit. Without that, I don't try as hard, honestly. Wondering how much these lost years on the 401k effect others? How common is the 1 year wait? Seems a disservice all the way around, like they could limit the match if they want, but at least offer it to ees? Were the plans that had delayed entry old plans? This feature was pretty common among plans that were started during the early days of 401K plans. Just why it was done this way, I don't know. But I suspect that it had something to do with turnover during the first year of employment. Some companies updated their plans to shorten or eliminate the eligibility period. But, HR functions often don't think such things are an issue if people aren't refusing job offers or quitting over the 401K plan requirements. So, some companies continue to have plan requirements that date from the plan inception in the early 80's.
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Deleted
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Post by Deleted on Nov 27, 2016 11:16:10 GMT -5
Interesting article on the financial impact of bad 401k rules: "Making workers wait a year before becoming eligible to participate. Every year counts when it comes to saving for retirement. For a 30-year-old worker earning a salary of $71,841, a one-year delay in plan eligibility could mean $51,758 less in savings at retirement, according to GAO projections." time.com/money/4581588/401k-plans-fail-millennials-3-ways-retirement-saving/
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plugginaway22
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Post by plugginaway22 on Nov 27, 2016 11:46:50 GMT -5
My employer requires a year wait to contribute and receive 401Kmatch, DH's company is only a 90 day wait.
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Post by The Walk of the Penguin Mich on Nov 27, 2016 11:51:50 GMT -5
My last employer required a year wait to get their match.....but not to contribute. You could continue to contribute in that first year and I did.
So I never missed any years. Even when I went on disability, I contribute to my Roth.
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bean29
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Post by bean29 on Nov 27, 2016 13:21:04 GMT -5
We require 1000 hours to begin contributing, so about 25 weeks. I asked one of our part time employees if she wanted to get into the plan, thinking the company would either bump up her hours, or change the rules, but she just said she wasn't interested. If this person asked for an accommodation the officers would probably make it happen.
I think the 1000 is in our plan rules, so I don't think you could negotiate getting into the plan early, without them changing the rules for everyone in the plan. Not positive though.
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Deleted
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Post by Deleted on Nov 27, 2016 14:36:47 GMT -5
I just did a quick calculation- only 44% of my investments are in IRAs. Part of that is because they didn't exist when I started working in 1975, and I didn't have access to one for the first 10 years. Part is that when we moved from NJ to KS there was a whole lotta money we got from selling our houses that we didn't need to buy one in KS. Finally, we never considered the 401(k) savings to be a ceiling on what we saved- it was a floor. Except for the Bad Old Days when I was married to my spendthrift Ex, I stashed away after-tax money, too. It's made for some pretty awful tax bills but I'd rather pay taxes on it than not have it at all. Note also that when you withdraw from an IRA or 401(k) it's taxed as ordinary income. Doesn't matter if it's dividends or long-term gains.
So, there are very good reasons to have both before- and after-tax savings.
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buystoys
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Post by buystoys on Nov 27, 2016 16:26:10 GMT -5
Most of my jobs pre-1996 didn't offer 401(k) plans. I opened an IRA in 1990 and maxed it for six years. When you remember that only $2000 per year could be contributed, it wasn't much of my overall savings. I also did after-tax investing to make up for it.
All of my jobs post 1996 offered 401(k) plans but only one had a decent and immediate match. My last job didn't even match 1% and you weren't vested for any of it until you'd been there five years.
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haapai
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Post by haapai on Nov 27, 2016 17:43:00 GMT -5
When I started my current job 14 years ago, there was a six-month delay before you were able to participate in the then-unmatched 401(k).
I remember getting the letter that informed me that I could now participate and trying not to be bitter. I was insanely broke at the time and throwing everything possible at the credit card debt (11.99% APR originally, 10.99% at the time of the letter) that I had accumulated during unemployment. Putting money into a 401(k) was a rather low priority for me. I was absolutely fixated on not defaulting and paying that kind of interest for the rest of my life.
Did I mention the pay? Oh yeah, Despite working 40 hours a week and doing every bit of OT available, I qualified for the earned income credit without a qualifying dependent for three years after starting that job.
I believe that the rules have now changed and that new hires can participate in the 401(k) immediately. There's a match now, but I don't know if it kicks in immediately or if there is a six-month or one-year delay. The vesting period for the match is five or seven years for new hires which means that nothing vests during the first two years.
Most new hires are working 16-24 hours a week during the slow seasons and 32-40 hours a week during the busier seasons. I suspect that very few of them grab the 40% match on the first 5% of income put into their 401(k)s or take the Retirement Savings Contribution Credit that would also be available to many of them.
It is extremely difficult to put money away for the future when you are living hand to mouth.
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Deleted
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Post by Deleted on Nov 27, 2016 17:51:01 GMT -5
When I started my current job 14 years ago, there was a six-month delay before you were able to participate in the then-unmatched 401(k). I remember getting the letter that informed me that I could now participate and trying not to be bitter. I was insanely broke at the time and throwing everything possible at the credit card debt (11.99% APR originally, 10.99% at the time of the letter) that I had accumulated during unemployment. Putting money into a 401(k) was a rather low priority for me. I was absolutely fixated on not defaulting and paying that kind of interest for the rest of my life. Did I mention the pay? Oh yeah, Despite working 40 hours a week and doing every bit of OT available, I qualified for the earned income credit without a qualifying dependent for three years after starting that job. I believe that the rules have now changed and that new hires can participate in the 401(k) immediately. There's a match now, but I don't know if it kicks in immediately or if there is a six-month or one-year delay. The vesting period for the match is five or seven years for new hires which means that nothing vests during the first two years. Most new hires are working 16-24 hours a week during the slow seasons and 32-40 hours a week during the busier seasons. I suspect that very few of them grab the 40% match on the first 5% of income put into their 401(k)s or take the Retirement Savings Contribution Credit that would also be available to many of them. It is extremely difficult to put money away for the future when you are living hand to mouth. I agree. You simply don't think of it as a priority, particularly if you are young. And yet that is where the biggest compounding effect comes from.
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tallguy
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Post by tallguy on Nov 27, 2016 18:12:46 GMT -5
It is extremely difficult to put money away for the future when you are living hand to mouth. I agree. You simply don't think of it as a priority, particularly if you are young. And yet that is where the biggest compounding effect comes from. One of the reasons I am fortunate to be in the position I am in. I started investing in my 20's and made it a priority even though I was never highly-paid. I am now semi-retired over 10 years early. What is just as important, though, is that I started my son on that plan. For his first job, I funded a Roth for him his first year to get him started. The second year I told him I would match his contribution, so of course he did $2750 to cost me as much as possible. And I charge him a lower rent on the condition that he invests at least $2000 into his Roth. If he doesn't want to do that, I'll just bump his rent up instead. He gets the idea.
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resolution
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Post by resolution on Nov 27, 2016 18:15:40 GMT -5
My employer requires a 6 month wait for both the pension and the 457 plan. Unfortunately it is extremely common for us to lose new employees at the 6 month mark. They are unprepared for the mandatory 12% pension payment to start being deducted from their checks, so they end up looking for other jobs and resigning.
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justme
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Post by justme on Nov 27, 2016 18:18:42 GMT -5
I never thought of it because I've never had it at my jobs, but a long time of not having a 401k might make me turn down a job. I'm contributing more than what I could put in an Ira, so unless the year wait was over two calendar years it'd have an impact.
Already knew to consider differences in match in deciding compensation. I wish companies didn't have long term vesting. I get not wanting to give it to someone who doesn't last a year or two with the company, but longer than that is crap if you ask me. Especially if you're only giving small percentages in raises over those years.
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tallguy
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Post by tallguy on Nov 27, 2016 18:28:09 GMT -5
There is a workaround, of course, if you are not planning to max your contribution. Save, don't spend, the money that you would have invested from each check. When you become eligible, set your contribution rate higher than you planned and use the savings to subsidize the lower take-home pay. After a year or two, you are back to even on what you wanted to contribute.
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haapai
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Post by haapai on Nov 27, 2016 18:35:18 GMT -5
I wasn't young, or math-challenged at the time. It was the 11.99% APR that was actually a 13.something % APY and the prospect of paying 18.99% APR and whatever APY that converts to that stopped me from considering retirement contributions. I needed to get that monkey off my back before putting money away long-term for an 8-11% annual return.
I suspect that if I sat down with a fifteen-years-younger version of myself who had recently hired in with my employer and had meticulous records of where her cash was going, I would have a hard time arguing the merits of 401(k) contributions. Getting any part of the match requires working there for at least 2 more years and the RSCC is non-refundable and is therefore quite tricky to value.
I suspect that I'd spend a lot more time talking about the phase-out of the EITC for singletons and the surprising marginal tax rates that it spawns than 401(k) contributions.
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SVT
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Post by SVT on Nov 27, 2016 19:37:48 GMT -5
Wondering how much these lost years on the 401k effect others? How common is the 1 year wait? Seems a disservice all the way around, like they could limit the match if they want, but at least offer it to ees? No effect for me. I don't know of a company in my industry that has restrictions on 401k's like that. If there was a company like that, I wouldn't work for them. A lot of companies in my industry don't even have a vesting period for company contributions to 401k either.
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ohmomto2boys
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Post by ohmomto2boys on Nov 28, 2016 14:33:41 GMT -5
Our company used to have a 1 year wait, but about 5 years ago changed the plan to no wait to contribute, but wait for match. Now we have an automatic 3% (Safe Harbor plan) from employer whether you contribute or not and that 3% begins with your first pay. On a side note - about 7 years ago, employer took away the 1 month wait to start healthcare. It starts on 1st day of hire. Everyone wants their benefits "now". LOL.
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Miss Tequila
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Post by Miss Tequila on Nov 28, 2016 16:13:35 GMT -5
I didn't have any lost years like the OP. I have only had two jobs since college and I stayed at my first one long enough to not forfeit the ER match (this company has immediate vesting).
Where I do have lost years is the time I stayed home with the kids and the several years after that I only worked part time. That has really hurt my 401 savings. I wouldn't trade that time for anything but I am definitely playing catch-up now. I max out my 401k and have for several years. But I also invest in real estate where I get much bigger bang for someone else's buck.
ETA: I'm also a prime example of why women should never rely on men! My ex's 401k balance is much higher than mine because he never took time off from work. Granted mine isn't a low balance but it still isn't where I would want to be at age 45. But I am rapidly making that up with real estate.
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Miss Tequila
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Post by Miss Tequila on Nov 28, 2016 16:14:47 GMT -5
There is a workaround, of course, if you are not planning to max your contribution. Save, don't spend, the money that you would have invested from each check. When you become eligible, set your contribution rate higher than you planned and use the savings to subsidize the lower take-home pay. After a year or two, you are back to even on what you wanted to contribute. Not really. I max out my 401k so I would be unable to make that up.
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tallguy
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Post by tallguy on Nov 28, 2016 16:24:13 GMT -5
There is a workaround, of course, if you are not planning to max your contribution. Save, don't spend, the money that you would have invested from each check. When you become eligible, set your contribution rate higher than you planned and use the savings to subsidize the lower take-home pay. After a year or two, you are back to even on what you wanted to contribute. Not really. I max out my 401k so I would be unable to make that up. Yeah, that was why I specified "if you are not planning to max your contribution."
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