Investing, Personal Finance, Retirement 
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My 401k Is Better Than Yours

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For some odd reason, some friends of mine were talking about 401k’s at the bar (talking personal finance stuff is not typical, but complaining about work is and this was just an extension of that) and basically they were comparing 401k plans. I, enjoying my pizza and shuffle puck, was dragged into the conversation because I represented another employer and so they wanted to see what the various industry 401k plans were like.

Here were the three 401k plans:

Large Defense Contractor: 3% match on a 4% contribution (100% match on the first 2%, 50% match on the next 2%), no profit sharing, immediate vesting.

Defense Consultant Firm: No match, 10% profit sharing after your first year, 5 years until fully vested.

Not-For-Profit Research Lab (with defense contracts): 8% match on a 4% contribution, no profit sharing, immediate vesting.

Remember, the 401k isn’t the only measuring stick when it comes to benefits and there are other aspects that change the financial equation. For example, with the Large Defense Contractor (LDC) and the Not-For-Profit Research Lab (NFPRL), you get a pension of some kinda, in fact the NFPRL’s 401k is really an extension of their pension plan. With the Defense Consultant Firm (DCF) you get no such pension, hence the profit sharing of 10% of your salary with no need for you to contribute any funds yourself. Also, immediately vesting is great for the employee (terrible for the company) because it gives you greater flexibility – 10% isn’t so awesome if you have to wait 5 years to get it all.

What’s your 401k plan? If you could swap your current plan with one of those, would you do it (all other things being equal, including your plan options, fund choices, etc)?

{ 21 comments, please add your thoughts now! }

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21 Responses to “My 401k Is Better Than Yours”

  1. wanzman says:

    I will be starting work for a large commercial bank/financial services conglomerate based in Oklahoma.

    401k match based on years of service:
    % match on employees 6% contribution

    Less than 4 – 50% (employer contributes 3%)
    4-9 – 100% (employer contributes 6%)
    10-14 – 150% (employer contributes 9%)
    15 or more – 200% (employer contributes 12%)

    It has a 5 year pyramid vesting schedule, with the employee vesting an additional 20% per year, and fully vested after 5 years.

  2. token endian says:

    the Not-For-Profit Research Lab tacks on an additional 2.5% to that 8% on 4%. You get the 2.5% even if you don’t contribute. And they have no pension plan, that is why they are so generous with their match.

  3. Phil says:

    I’m in one of those positions of being in a small (

  4. plonkee says:

    My similar scheme has contributions based on age.

    under 30
    you contribute 1.5%, they contribute 3%,

    between 30 and some other age maybe 40?
    you contribute 2.5%, they contribute 5%

    Of the three on offer, I like the not for profit the best, 5 years is a long time.

  5. pfodyssey says:

    All of these are quite interesting (including the comments). I had not realized there was such a wide variety amongst 401(k), I had always thought they were variations of the same theme (ex: X% match on first X% of contributions)…had no idea there were age based or service based ones as well.

    As a stand-alone, it is interesting to see the differences and make some initial judgments about which are better. HOWEVER, I have also found that some great 401(k) plans are coupled with TERRIBLE health plans (for example) and so then the total benefits package does not look so great in the aggregate.

  6. dong says:

    I’m at a large energy company and pretty pleased with the 401k the company offers
    6% match on my contributions
    3% fixed profit sharing
    0-7% variable profit sharing

    On average because I contribute the full 15%, I usually end up getting almost another full 15% just from the company. No complaints other than the 5 year cliff vesting, but since I’m past that i can’t complain about that either….

  7. mapgirl says:

    Heh heh. This will be fun since I work private sector, totally not government related, but in the same metropolitan area, so the same job market.

    We get 50% employer match for the first 5% of salary contributed, so it is maxed at 2.5% of your income. That’s not great unless you negotiate yourself a good salary at the outset. (Which everyone is, RIGHT?)

    Vesting schedule is 1 year = 20%, 2 years = 60% 3+ years = 100%.

    We also get a True-up contribution if contributions were front-loaded, but they are lagged by 3 months. But that’s better than losing the match on the last few paychecks of the year because of front-loading.

  8. KMC says:

    My company’s plan is pretty good I think. 100% match on first 8% and a variable 2-3% at the end of the year (they decide the amount). I think the vesting is a cliff at 3 years. I’m not sure since I’ve been here a while. And like Mapgirl, they have a true-up.

  9. broknowrchlatr says:

    Mine is pretty standard and boring. Full match up to 4% then nothing after that.

    Pension is also included. It will roughly come out to 45% of my total compensation at retirement.

    Both are immediatly 100% vested. So, even if I leave the company after a few years, I can qualify for a couple thousand bucks a year at retirement.

  10. Martha says:

    Well folks, working for a newly IPO’d company means that I have no employer match on my 401K. Fun stuff!

  11. Miller says:

    That’s crazy! I work for a LDC and I get (a lousy) 3% match on my “savings plan” (dunno why they don’t say 401K). Also crazy, I dragged a friend named Jim into a humorously competitve 401K conversation at a bar last Saturday night!

    In all seriousness, I need to figure out how said LDC’s pension works… they don’t like to make this stuff simple, do they?

    Of the above three, given just the information you presented, I’d take the DCF. Money is money, baby!

  12. Matt says:

    100% match on the first 5% contribution. New employees get immediate vesting, but I have to wait until my 3 year anniversary (at the end of this month, thank God) to get it. Plus the choice of funds to invest in is pretty lousy.

    I’ll be glad to get out of this place. Three years is too long for anyone in my field to stay at one employer unless they hold significant stock options (“signigicant”==”worth more than two years’ salary”) or are part of the executive team. Plus, since they made me switch to the 2000-0400 shift (away from my preferred 2300-0700) I haven’t talked to any of my friends or professional contacts…the network it took me 15 years to build has been all but destroyed in six months.

    Funny, I have this memory of promising our host that I’d write a guest post about this subject. :)

  13. MossySF says:

    I work in a small company so we use the safe harbor option to avoid end-of-year plan testing. Hence, it’s the basic 100% match on the first 3% and 50% on the next 2%. Total of 4% matching if you contribute 5% of your salary. Choice of funds are ok — good choices in large cap and bonds, decent in small cap, crappy choices in international and reit.

  14. eROCK says:

    I work for a Fortune 100 in the Northeast and we get a 5% match on a 6% contribution. Except that the match can’t be more then $1,200 … hows that for a buzz kill?

    I’m looking into another job that provides no match, but grants restricted stock offerings and also a bonus. I guess if I role the bonus into a Roth IRA, that’s my match :-) Yea, Yea, it’s post-tax, but what can you do!?

  15. Foobarista says:

    I work at a tech startup, and while I have a 401K that I max out for tax purposes, there is no match at all. Fortunately, our CEO was relatively careful picking the plan so we have a decent set of index funds to invest in. Previous startups I’ve worked at typically have a bunch of overpriced garbage funds.

    In those case, I parked my cash in the MM fund and waited until I lobbied for new funds (worked once) or until I went elsewhere.

    The main benefit is the options and restricted stock I get as an early-stage employee.

  16. allen says:

    No match, 10% profit sharing, vesting after 5 years. I’m pretty sure your buddy at DCF is one of my colleagues.

  17. Micah says:

    In the military, we have no match in the TSP (a 401k) while our civil service counterparts do. Of course, we have free healthcare and from what I hear, a decent pension to boot!

  18. debttodreams says:

    as a medical Resident we have no match and I was not even eligible for a retirement plan through our hospital. I had to contribute to an IRA.

  19. Punchy says:

    I get a 100% match on 2.5% but I have to contribute 5% of my paycheck to get the full match. No profit sharing, no bonuses, and no stocks (it is a private company). Oh and there’s a 5 year vesting period. Doesn’t sound like a company that has gross revenues approaching 500 million / year, does it?

  20. Anonymous says:

    I just landed a job that gives 150% match per dollar up to 10% contribution!!!


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