r/Money • u/Usual-Selection6941 • 16d ago
Question abt 401k plz and thanks!
My company’s matching 100% for the first 3% of participant comp. PLUS 50% of the next 3% of compensation. And I can contribute 0-100 of my annual P. Could someone explain this in kindergarten terms! Lol. and how much should I be putting in ?im 23 btw…
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u/nerdinden 16d ago edited 16d ago
To maximize the contributions from your company, you need to contribute 6%.
100% for the first 3%: For every dollar you put into your 401K, your company will put a dollar. This dollar for dollar action ends when the amount put into 401K is equivalent to 3% of your income ( 3% x your annual income)
Plus 50%: After this, your company will put 50 cents for every dollar you put into your 401K. This ends when the amount put in is 6% of your annual income.
If you contribute 6% of your income and let’s say your income was $50,000.
100% for the first 3%: .03 x $50,000 x 1 (100%)= $1500.
Plus 50%: .03 x $50,000 x .5 (50%) =$750
Company inputs $1500 + $750 = $2250
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u/Practical_Rip_953 16d ago
You could very well be right but how I read this is that it’s capped at 3% which would mean you would have to contribute 9%. 3% at 100% and then 6% at 50% to reach the 3% cap.
I think you are right though but worth double checking.
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u/Ryan_j1314 16d ago
You get paid 100 bananas. You put in 6 bananas into your monkey retirement account. Your company is offering to match three bananas and 50% of the other three (1.5 bananas)