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401k vesting

pete6032

pete6032

Diamond Member
I just applied to a job that has a 5-year vesting period for 401k. My current job I had to wait 1 year to be eligible for 401k (safe harbor). The matching at this 5-year vest job is pretty standard, matches 100% up to 3% and 50% to 5%. I think it's ridiculous having a 5-year vesting period for a 401k. Did you job have a vesting period or safe harbor period?
 
So 4% total match. Did I calculate that right?
3 * 1%
2 * .5%

5 years while on the higher side is somewhat standard.

When I was with Big 4 accounting firms their general model was 4 years. BUT they vested it over time... E.g. stay for 1 year you are 20% vested. Stay 2 years you are 40% vested, etc.

Also my first employer was 3 years.

What exactly is a safe harbor period? Can't say I've ever had that from an employer.
 
Current employer is monthly match of 6% with no vesting period. Last employer was 0% match.

at a Big 4 my match was fully vested after 1000 charge hours or my 5yr anniversary. There was no vesting tranches, it was all or nothing unless you stayed the full period.
 
IIRC, my current position had a 5 year vesting period. Matches were drastically cut for new hires after 2014.
 
Wow I had never heard of that before for 401k. I have only heard of that for stuff like stock options which makes more sense.

My current employer puts in 8% regardless of you putting anything in and it vests immediately. I've been here 7 years now and every year in December they put in an extra 1% as well since we're doing well.
 
The best vesting option I had was immediate. The worst was over a 5 year period with 25% bump each year. So after year 1 you were 25% vested. Current offer is no employee match till 1 year of employment but after 1 year they contribute 10% of your salary and vesting is immediate.
 
I believe that for the most part 401k plans have been declining in what employers provide compared to what they were 20-30 years ago when they were first introduced as a replacement for pension systems.

I am a Gen X'er, and fortunately my previous 401k plans for the first 25 years were generously matched, after having my pension eliminated at my first job. (I was early on in my career(first couple of years), so I did not realize how devastating this was for when you reach retirement age, like I am now approaching)

Fast forward 30 years, and my last several plans have the 5 year vesting period (20% each year), as well as no matching for the first year--so it really makes it 6 years until fully vested), and the added bonus of that you do not get matching biweekly in your pay--it is only deposited once per year. In order to receive the match, you need to be employed the FULL calendar year (January 1 thru December 31). So if you leave at any point in the calendar year, you receive zero matching.

Here is an article explaining one of the new trends in 401k matching.

www.nytimes.com

Beware the End-of-Year 401(k) Match (Published 2014)

So-called last-day rules allow a company to put its 401(k) contribution on the last day of the year, which deprives employees of some benefits.
www.nytimes.com www.nytimes.com

You know that the bean counters in accounting have determined that the percentage of people that come and go thru the year can save the company a large amount of money, by not having to match as people come and go...and especially if you stretch that out to 5 to 6 years to be fully vested.

I'm wise enough to be thankful to appreciate any employer matching, as there are lots of people who do not even get that. I am also thankful that my first 25 years allowed me to accumulate a fairly large sum for retirement. But looking back on it, the pension system I originally started in would have paid me more monthly for the rest of my life, than what I have saved over 30 years.

Any one today who is in a pension system (government seems to be the only ones still around) should be extremely thankful that they have that...and hope that the pension system stays solvent.
 
My employer, which matches 6% (full match on the first 4%, half match on the next 4%), also has a 5-year vesting period for matched funds at 20% each year. But the vesting is only based on when you started employment, not when the funds were matched. So, since I've been here more than 5 years, all of my past matching is vested and all of my future matching is also already vested.
 
another data point for you

vesting: 1/3 every year, fully vested after 3 years.
match: 100% up to 3%, 50% up to 6%. so maximum match is 4.5%
 
At my last employer, the 401k match was vested immediately and the pension they provided vested at 5 years. At most of my other employers, the match fully vested at 5 years, with 20% vesting each year. This is pretty typical and frankly, it is stupid - you should be vested immediately. The only one I cared to stay long enough to vest in was the employer who contributed 4% based on my contribution and also threw in 10% of my salary as an additional contribution.
 
IndyColtsFan said:
At my last employer, the 401k match was vested immediately and the pension they provided vested at 5 years. At most of my other employers, the match fully vested at 5 years, with 20% vesting each year. This is pretty typical and frankly, it is stupid - you should be vested immediately. The only one I cared to stay long enough to vest in was the employer who contributed 4% based on my contribution and also threw in 10% of my salary as an additional contribution.
Click to expand...

I agree! The sheep have been conditioned to accept less and less in their benefit packages as time has marched forward. I am one of those sheep, because something is better than nothing.

I certainly am thankful to have what I have, but the brutal honesty is that employment benefits today are not nearly what they were for the last several generations.

 
pete6032 said:
I just applied to a job that has a 5-year vesting period for 401k. My current job I had to wait 1 year to be eligible for 401k (safe harbor). The matching at this 5-year vest job is pretty standard, matches 100% up to 3% and 50% to 5%. I think it's ridiculous having a 5-year vesting period for a 401k. Did you job have a vesting period or safe harbor period?
Click to expand...
Previous job was a 5 year vesting, 20% each year (eg if you left at year 4 you left with 80% of company match).

I think this is pretty common.

Current job has immediate vest.
 
Johnny Ringo said:
I believe that for the most part 401k plans have been declining in what employers provide compared to what they were 20-30 years ago when they were first introduced as a replacement for pension systems.

I am a Gen X'er, and fortunately my previous 401k plans for the first 25 years were generously matched, after having my pension eliminated at my first job. (I was early on in my career(first couple of years), so I did not realize how devastating this was for when you reach retirement age, like I am now approaching)

Fast forward 30 years, and my last several plans have the 5 year vesting period (20% each year), as well as no matching for the first year--so it really makes it 6 years until fully vested), and the added bonus of that you do not get matching biweekly in your pay--it is only deposited once per year. In order to receive the match, you need to be employed the FULL calendar year (January 1 thru December 31). So if you leave at any point in the calendar year, you receive zero matching.

Here is an article explaining one of the new trends in 401k matching.

www.nytimes.com

Beware the End-of-Year 401(k) Match (Published 2014)

So-called last-day rules allow a company to put its 401(k) contribution on the last day of the year, which deprives employees of some benefits.
www.nytimes.com www.nytimes.com

You know that the bean counters in accounting have determined that the percentage of people that come and go thru the year can save the company a large amount of money, by not having to match as people come and go...and especially if you stretch that out to 5 to 6 years to be fully vested.

I'm wise enough to be thankful to appreciate any employer matching, as there are lots of people who do not even get that. I am also thankful that my first 25 years allowed me to accumulate a fairly large sum for retirement. But looking back on it, the pension system I originally started in would have paid me more monthly for the rest of my life, than what I have saved over 30 years.

Any one today who is in a pension system (government seems to be the only ones still around) should be extremely thankful that they have that...and hope that the pension system stays solvent.
Click to expand...


Yeah, I find 401k matches to be down-right pocket change. This is one of the reasons I always recommend attempting to haggle/negotiate your starting pay.

An extra $5k on your paycheck yearly will likely easily surpass whatever you would get for 401k matches.



Also one comment on Pensions.... Just because it's a pension doesn't mean it's some mysteriously awesome and amazing machine that is a better investment vehicle than a 401k. I don't know where people get off thinking that. All of the Big 4 accounting firms have a hybrid system (e.g. 3% match on 401k, but also a 1-3% to the pension fund depending on your number of years with the firm).

Regardless of if it's a 2% match to a 401k or a 2% match to a pension fund, it's still just an investment vehicle.... Except with the 401k you're not at risk of it being insolvent.
 
Johnny Ringo said:
I certainly am thankful to have what I have, but the brutal honesty is that employment benefits today are not nearly what they were for the last several generations.
Click to expand...
Got that right.
We get paid Holidays(9), paid vacation (up to 15 days/yr). These haven't changed over the years
Employer paid health ins. for employees only. They used to cover families but all workers paid part of our premium.
Eye & dental - Gone
401k - Gone
Partial OT pay on vacation - Gone
Probably a few other things i'm forgetting too.
 
s0me0nesmind1 said:
Yeah, I find 401k matches to be down-right pocket change. This is one of the reasons I always recommend attempting to haggle/negotiate your starting pay.

An extra $5k on your paycheck yearly will likely easily surpass whatever you would get for 401k matches.
Click to expand...


I agree, assuming that the person actually saves that money. In reality most people will spend that $5k annual increase on their daily trip to Starbucks, and buying the latest and greatest iPhone each year instead of contributing to their retirement funds.

Getting people to save for retirement is extremely difficult. People are mistaken in that they will always be healthy, and employable--with no need to save even if they can afford it. It's something that they put off for far too long, until it is too late.

I disagree about pensions though. If you work for a state or federal government entity, there is little chance of a pension going into default. It is much more common for private industry pensions to go unfunded properly, and go into default. They can always tax more to get the funding, or borrow money indefinitely.

If a federal government pension system were to go belly up, there would be far greater problems going on in the overall economy, where everyone would be in really bad shape.

Take social security for example. I am of the belief, that they will never let this completely fail. It may eventually result in a lower benefit amount, or changing the age limits to claim benefits to stay solvent. Zero chance of this disappearing completely.
 
I work for a smaller company, so they just went with a simple IRA with 3% of your salary deposited, then whatever % you want on top of that (ie- 3% they give + 7% = 10% total) . We didn't have a vesting period.
 
I think that I get a 50% match on my first 6% of contributions. That's pretty much the standard issue package now, right? It's vested right away, but you need to wait six months to join the program.
 
s0me0nesmind1 said:
Yeah, I find 401k matches to be down-right pocket change. This is one of the reasons I always recommend attempting to haggle/negotiate your starting pay.

An extra $5k on your paycheck yearly will likely easily surpass whatever you would get for 401k matches.



Also one comment on Pensions.... Just because it's a pension doesn't mean it's some mysteriously awesome and amazing machine that is a better investment vehicle than a 401k. I don't know where people get off thinking that. All of the Big 4 accounting firms have a hybrid system (e.g. 3% match on 401k, but also a 1-3% to the pension fund depending on your number of years with the firm).

Regardless of if it's a 2% match to a 401k or a 2% match to a pension fund, it's still just an investment vehicle.... Except with the 401k you're not at risk of it being insolvent.
Click to expand...
Previous company had a good gig. 75% matched up to 6% of salary into 401k, then a separate cash retirement plan (eg pension) that accumulated based on age & years of service.

I was with the company for just shy of 8 years and the cash retirement plan built up to around $23k, and if you leave the company you can do whatever you want with it.
 
s0me0nesmind1 said:
Yeah, I find 401k matches to be down-right pocket change. This is one of the reasons I always recommend attempting to haggle/negotiate your starting pay.

An extra $5k on your paycheck yearly will likely easily surpass whatever you would get for 401k matches.
Click to expand...

It depends. If you're making $100k and your company matches 4%, that's an extra $4k tax-free (provided you're using Traditional) into your retirement account. That's nothing to sniff at. Regardless of your salary, a >4% increase in your savings rate by doing absolutely nothing (well, close to nothing), is excellent.

My company had a pretty bad 401k up until about two or three years ago when they switched to Fidelity. The funds are excellent, and they now provide a 4% match (100% up to 3%, then 50% up to 5%), with an immediate safe-harbor vesting.
 
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