Retirement plan for new job

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taxi22
Posts: 15
Joined: Sun Jan 28, 2018 10:31 am

Retirement plan for new job

Post by taxi22 » Mon Mar 12, 2018 11:56 pm

Hello all,
I have never had a 401K plan through a company or matching before. The new job offer I am currently considering, is offering...

"Retirement Plan - [The company] makes a non-taxable contribution to
employees’ Retirement Plan equal to 8% of their salary up
to the FICA base and a contribution of 12% on salary above that
base, up to the federal limit for contributions. Contributions begin
the first month of employment and do not require employee
contributions. Employees are partially vested after two years of
service and fully vested after five years of service."

Can someone please tell me what that means? My base salary will be 50k

Thank you!

sport
Posts: 6865
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Retirement plan for new job

Post by sport » Tue Mar 13, 2018 12:38 am

It means that they will put $4000 per year into the plan for you (more when your salary increases). After 2 years, some of that will be yours, even if you leave the company. After 5 years, it is all yours. This is a very nice benefit.

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mhadden1
Posts: 298
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: Retirement plan for new job

Post by mhadden1 » Tue Mar 13, 2018 12:59 am

Is this a 401k account, where you can also have your own contributions withheld from your paycheck? And invest the money in mutual funds and such that you select from a list?
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

taxi22
Posts: 15
Joined: Sun Jan 28, 2018 10:31 am

Re: Retirement plan for new job

Post by taxi22 » Tue Mar 13, 2018 8:26 pm

sport wrote:
Tue Mar 13, 2018 12:38 am
It means that they will put $4000 per year into the plan for you (more when your salary increases). After 2 years, some of that will be yours, even if you leave the company. After 5 years, it is all yours. This is a very nice benefit.
Thank you!
mhadden1 wrote:
Tue Mar 13, 2018 12:59 am
Is this a 401k account, where you can also have your own contributions withheld from your paycheck? And invest the money in mutual funds and such that you select from a list?
Yes, I'm pretty sure it is a 401K or 403b (since this is a non-profit) where I can make my own contributions. I was just confused about the 8% and 12%.

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mhadden1
Posts: 298
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: Retirement plan for new job

Post by mhadden1 » Tue Mar 13, 2018 8:32 pm

That employer contribution is a really great benefit. Congrats! I hope you will be able to add your own contributions and make a lot of headway on your retirement saving.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

taxi22
Posts: 15
Joined: Sun Jan 28, 2018 10:31 am

Re: Retirement plan for new job

Post by taxi22 » Sun Apr 15, 2018 10:34 am

mhadden1 wrote:
Tue Mar 13, 2018 8:32 pm
That employer contribution is a really great benefit. Congrats! I hope you will be able to add your own contributions and make a lot of headway on your retirement saving.
Thank you!

RickBoglehead
Posts: 234
Joined: Wed Feb 14, 2018 9:10 am

Re: Retirement plan for new job

Post by RickBoglehead » Sun Apr 15, 2018 11:36 am

And, when you earn more (i.e. FICA base), they'd contribute 12% instead of 8% on the amount over the FICA base.

FICA base refers to the amount of salary that you pay FICA tax on, i.e. Social Security and Medicare. In 2018, the FICA base is $128,400. After $128,400, you only pay Medicare tax, not Social Security tax.

So, if you earned $150,000 a year, they'd contribute 8% on the first $128,400 and 12% on the remaining $21,600 ($150,000 - $128,400).

Very nice benefit!

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