Average 401K Matching Contribution?

[OBGibby]

Looking for assistance in determining what the average 401K matching contribution is. My spouse works for a company that has provided 10% matching contributions (10% of salary, regardless of what the employees contribute) for the past 30 years. This sounds like a very generous matching contribution. Can anyone shed some light on how it relates to other 401Ks?

[James48843]

10% matach is extremely generous.

Most places I know of match 3%, some4% or 5%. No one that I know of matched more than 6%.

Benchmark your 401(k): http://www.401khelpcenter.com/benchmarking.html

Here in Michigan, all the auto companies have now stopped their matching funds on 401(k)'s as money-saving for the company, and many smaller companies are now doing the same.

I don't know what company that is that is doing 10% matching,but that sounds like a very, very good deal for you.

[OBGibby]

My spouse's company 10% matching contribution makes our 5% matching from Uncle Sugar look paltry! My only gripe about is that it is a once a year contribution, instead of being spread out like our TSP matching contributions throughout the year. So hopefully, when the funds get deposited in my spouse's 401K it will be when the funds are cheap.

That being said, in light of the current economic situation, we're very fortunate the company is providing any matching contribution.

[squalebear]

That being said, in light of the current economic
situation, we're very fortunate the company is providing any matching
contribution.

Any 401k should be greatful that the company that holds it, is salvent and
the Insurance Company protecting it is too ! Ooops, I forgot, Uncle Sham
has us covered for $250k and China will be covering Uncle Slam. :worried:

[James48843]

Seen on the Huffington Post:

Real Change:
Outlaw 401(k) Plans

Dan Solin Dan Solin
Tue Jan 6, 9:17 pm ET

President-elect Obama ran on a platform of "real change." Here's my proposal which would make good on that promise:

Outlaw 401(k) plans. Throw them out entirely and replace them with something that would be an economic stimulus for those who need it the most.

The 401(k) system is a disgrace. Employers get paid off in the form of subsidies to select brokers and advisors who control the investment options in the plan. They, in turn, get paid off by fund families and insurance companies which limit employees' investment options to costly, under-performing funds.

The fox guarding the hen house is the big winner. They have a vested interest in steering employees in the wrong direction. That's why there is no standardized investment education.

It gets worse:

The hidden costs in these plans were starkly illustrated in recent testimony (http://us.rd.yahoo.com/dailynews/huffpost/cm_huffpost/storytext/154768/30475501/SIG=1283of4cv;_ylt=AtE2URBtnSg8KdtHG7prif8e6sgF/*http://edlabor.house.gov/testimony/030607MatthewHutchesontestimony.pdf)before Congress. The mutual fund industry was aptly describe as the world's largest "skimming operation". It views the $12 trillion in 401(k) assets as a "trough" from which it siphons off an "... excessive slice of the nation's household, college, and retirement savings."

Let's just admit defeat. We are no match for this powerful industry. We need to stop tinkering with these plans, toss them out, and start all over.


Here is my proposal:

All employees would be eligible to participate in the Solin Self-Reliance Plan (SSRP).

Think of the SSRP as a Roth IRA on steroids. There would be no income limitations on eligibility. The contribution limits would be the same as a 401(k) plan: $16,500 for 2009. Contributions would be made with after-tax dollars.

The balance of the Roth rules would apply:
No penalty for early withdrawal of the amount contributed;
Tax free withdrawals after 59 1/2.;
No required minimum distributions at any age


Here's the twist:
In order to qualify for the SSRP, you would have to take a standarized, short (5 question) questionnaire, available on the Internet. The results of the questionnaire would suggest either (i) one of 5 pre-allocated, globally diversified, low cost portfolios of index funds, Exchange Traded Funds or passively managed funds or (ii) Target Retirement funds, consisting solely of low cost index funds. It would list fund families who qualified to provide these fund options. The fund families would be required to disclose all costs charged on a standardized form approved by the Department of Labor. The employee would then select from these options.

By limiting investing options in this way, employees are assured of making intelligent choices. This is precisely what the government does with its wildly successful Thrift Savings Plan, (http://us.rd.yahoo.com/dailynews/huffpost/cm_huffpost/storytext/154768/30475501/SIG=10k1tm433;_ylt=AmHG.TWKUKodX37.2A_Dqoce6sgF/*http://www.tsp.gov) the 401(k) plan available to government employees.

I can hear the naysayers now.

What about the corporate match?

Ask employees of Frontier Airlines, General Motors and Kodak. These mega-employers have stopped matching 401(k) contributions. Many more are sure to follow.

What are you really giving up, even if you got the much-hyped match? You still would have to pay taxes at your marginal tax rate when you take distributions. How confident are you that this rate will not offset most of the benefits of the tax deferral? Wouldn't you rather know that your distributions will be tax free?

What is the value of intelligent, low cost, high performing investment options over expensive, high cost options available in most 401(k) plans? Impossible to calculate, but very significant.

Now for the real kicker:

What is the value of not participating in a system that is ripping you off to benefit your employer and the securities industry?

There was a time in this country when rugged individualism was valued. It's time to return to those principles.

The Solin Self-Reliance Plan would be a major step in that direction.

Source: http://www.huffingtonpost.com/dan-solin/real-change-outlaw-401k-p_b_154768.html

[James48843]

P.S.- Sounds like an interesting idea to me...

[alevin]

P.S.- Sounds like an interesting idea to me...

I've read other Huffington material, kinda like their style.

[OBGibby]

More food for thought (sorry, article was too long to post due to character limitations on post sizes)...


Big Slide in 401(k)s Spurs Calls for Change

Wall Street Journal
January 8, 2009



http://online.wsj.com/article/SB123137714796462913.html

[Silverbird]

I'd rather have a choice of a 401K and if I don't like my 401K, put it in an IRA and manage it myself. I also like the tax deferral because that means that the total amount I put in gets invested, not after someone's taken the taxes off the top.

As for making the Government plan the model, I have a problem with that, there are conflict of interest reasons that the TSP funds are general rather than individual stocks and industry categories. But if you do NOT have a conflict of interest problem, you will want to pick certain companies or industries and reward them with your investment. Government TSP "rewards" all companies in the SP 500 or the Wilshire 4500, and the International fund EFA companies whether or not their stock looks like a good investment, or not. As for mutual funds, yes, some of them went incredibly haywire. But so did the longer term L funds, and the SP 500, Wilshire 4500 and the I fund. If you don't like your 401K, run, do not walk to the nearest IRA exit.

[ripper]

We have a local company - Hutchinson Technology (HTCH) - that was offering 3% matching to each 1% 401K contribution by its employees, up to a maximum of 3% by the employee.
I'm not sure that they're still doing this, however, due to their recent financial situation. Last week Hutchinson announced layoffs of 30% of its workforce and is currently trading for about $3/share, down from its 52-week high of $24.

[roskopfm]

From a December 08 article at CFO.com

BI, in fact, points to an October survey of 248 employers that Watson Wyatt Worldwide conducted, finding that 2 percent said they had reduced or suspended either their 401(k) and 403(b) matching contributions, while 4 percent said they planned to make similar moves in the next 12 months.
These developments are not unique to the current economic downturn. When the 1990s boom wound down, the average employer match fell from 3.3 percent of earnings in 1999 to 2.5 percent in 2001, according to the insurance publication, citing the Center for Retirement Research at Boston College. It noted that today the average employer match is 3 percent of earnings, citing David Wray, president of the Profit Sharing/401(k) Council of America.
What's more, 80 percent of employers with a 401(k) match employee contributions, while 75 percent of the other 20 percent make some other contribution, such as company stock, according to the report.
There are risks to eliminating the match, however. If younger, lower-earning employees, who have already suffered huge paper losses on their accounts, stop participating in the plans, the higher-earning employees who remain in the plan could be hurt. This is because the plan could fail Internal Revenue Service nondiscrimination tests. BI notes that the tests are required to assure that contributions by highly compensated employees don't exceed contributions by lower earning employees by a certain amount set by law. Highly compensated employees are defined as those who earn at least $105,000 per year.

http://www.cfo.com/article.cfm/12754031/c_12754776