How supersavers cheat themselves out of 401(k) matches

The problem with supersavers

Neither of the two examples above risks losing any employer matching contributions. But a potential problem comes in if you max out your 401(k) early. That’s because once you hit the yearly contribution maximum, your employer will stop taking money out of your paycheck to go toward your 401(k). In some cases, employers also then stop the match — they haven’t yet matched the given percentage of salary.

For example, take the same example above where you save 30% of your salary, but assume that you make $92,500 instead of $60,000. Your monthly pay of just over $7,700 would lead to monthly contributions of $2,312.50, and if you had a dollar-for-dollar match on the first 6% of salary, you’d receive $462.50 in matching contributions. However, at that rate, you’d hit the $18,500 maximum eight months into the year. Beginning in September, your employer would no longer take 401(k) contributions out of your check, and you’d stop getting the $462.50 per month match. For the year, you’d get only eight months’ worth of matching, or $3,700, rather than the $5,550 you should have gotten.

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