Climbing From Debt » 401(k)

Result of my 401(k) Increase

KC — Thu, 13 May 2010 18:08:05 +0000

So, during my last net worth update, I mentioned that I had increased my 401k contribution from 5% per paycheck to 8% per paycheck. Many friends of mine either don’t contribute to their companies 401k plan or if they do – they never increase their contribution amount. Typically, most set their contribution amount to the minimum amount to qualify for a company match. That’s fine – but many have told me that they won’t increase their percentage because they don’t want the amount taken from their paycheck.

Well I just took a look at my most recent paycheck, which includes my new 8% contribution. The bottom line is that it didn’t hurt at all. In fact, barely felt the few additional dollars. In total, my retirement contribution went up by about $80 while only about $60 was taken out of my check. So, the tax advantage of the 401k contribution is basically like $20 free bucks. Not too bad, eh?

In fact, kind of makes me want to do a little math right now and determine if I should raise it to 10%. We’ll see.

401k Employer Contribution Received

KC — Sun, 08 Mar 2009 19:54:00 +0000

I’ve been checking for a little over a month now, but it’s finally here. Over $4,000 has been put into my 401k account from my employer. The contribution is based upon profit-sharing and not upon my contribution amount, which is great because in one day that deposit exceeded what I had put in there for the entire year.

Even better (for me at least) is that stocks are really down right now, so my $4,000+ infusion went directly to cheaper stocks with a big (hopefully) growth potential!

Obviously, this has really made my week!

Ouch!

KC — Sun, 19 Oct 2008 17:24:00 +0000

I’ll be posting a net worth update for October soon. It was delayed due to a much needed vacation. Honestly, each year at this time I take a vacation and I know the argument that when you’re in debt you shouldn’t be spending money on vacation – but for health reasons mental and otherwise, I feel that it is important to get away for a little bit.

Anyway – I returned home to a good surprise and a bad surprise. The good surprise was a drop in gas prices in the Boston area. Currently, some prices around here have dropped a little more than 30 cents.

The bad news, which will be outlined in my upcoming net worth post, is that my 401k took a solid punch to the nose in the past month, dropping by over 20% in value.

I saw it coming, but seeing it has a different feeling than experiencing it. In the end though, I know that I’m still just building that account and that stock value dropping is just code for “buy, buy, buy”.

It helps to have a little motivational article from the Oracle too…

“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.”

So, with that said, onward we go.

New 401k

KC — Fri, 11 Jul 2008 20:21:00 +0000

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.