So, I signed up for my company’s 401k plan this week. I planned to contribute only to the match, since I am still working to pay down my debt. However, I learned that my company does a year end profit sharing contribution instead of a match and it is based on your salary and not affected by your contribution percentage.
I am new to the profit sharing concept, so I asked about 15 what-if questions just to be sure I wouldn’t miss out on any free money. Just to be safe and because it really wouldn’t hurt that much, I decided to contribute 5% per pay period anyway.
It’s a little under $80 a paycheck and I’ll forget it’s even being removed in about a month or two.
I know it’s kind of breaking the common debt reduction rule, but on the other hand I have a lot of years for that $80/week to grow into something before I need it.
My next step is rolling over my $8,000+ 401k from my previous job. Having never done that before, I’m sure I’ll be asking my HR person another 15 questions about that within the next week or so.
Lastly, yes I know the argument that the growth on my 401k account pales in comparison to the money I am bleeding by paying credit card interest rates. But I feel good about contributing right now – even if just a little – and once I pay off my debt, I plan to put savings and retirement savings into overdrive to catch up slightly. That’s the plan at least.
Hi KC,
I applaud this move on your part. It looks like you’re already doing a good job paying down debt. I like the psychological benefit of building up savings (aside from the obvious real benefit!)
Ideally paying down debt as quickly as possible would be the “best” decision financially, but I’m in the same boat as you – paying off debt while also saving/investing.