IPB 075: Stay for the 401k?

In episode 75, our discussion revolves around a suggestion that comes from this article over at Fox Business. In particular, the article points out that many larger and well-known employers are aggressively raising their matching contributions for their employees in the company 401k plan.

The article goes on to suggest that companies believe this is an effective means of retaining talent and helping workers accumulate enough money to retire–making way for younger employees.

We think that all sounds great. More money from the company you work for toward your retirement is generally a good thing.

But…do people really stay with a company because of the matching contribution in the 401k? Not likely.

We've both been in the business of talking personal finances with people for a number of years and never heard anyone mention their sweet 401k as a reason they stayed at a job. The best retention tool seems to be actually paying people more.


One Response to “IPB 075: Stay for the 401k?”

  1. Bob says:

    Thanks for the podcasts, always informative and entertaining.

    My wife doesn’t necessarily stay at her company for the 401K match but a match of 35% doesn’t hurt. Most employees at the company have no idea how good a deal this and no clue what the 401K match means in actual dollars.

    When I tell other folks that she gets a great deal with a 35% match, they always say, “but my company matches 50%, I’m getting a better deal.”

    They repeat the HR department’s line, “I get 3% up to 6%, so I get 50%. Then I tell them their company match is only several hundred dollars even if they’re maxing out the 401K. They still don’t get it until I pull out a piece of paper and show them what my wife’s 401K plan matches in real dollars. They match 35% with no ceiling, so when she puts in her max of 24K (includes over 50 catchup), she gets a match of $8400. That’s how a 35% match beats a 50% match.

    The bottom line: employees won’t stay at a company for the 401K match because they don’t actually know what it means in real dollars.

Leave a Reply


  • Archives

  • Categories