Workers Would Lose Serious Money if Employers Paid 401(k) Contributions Once a Year
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A worker who started out earning $40,000 and switched jobs seven times over the course of a 40-year career would lose $47,000 in lifetime retirement savings if all of her employers followed IBM’s example and paid 401(k) retirement contributions as lump sums on the last day of each year, according to a simulation performed for The New York Times. The reason: She would lose significant employer contributions to her retirement savings in the years when she switched jobs. Only a small percentage of companies have adopted “last day rules” on 401(k) contributions, but the number is expected to rise as companies look for new ways to save money.

SOURCE:  Beware the End-of-Year 401(k) Match

 

This blog first appeared on Harvard Business Review on 2/25/2014.

View our complete listing of Compensation and Benefits blogs.

 Workers Would Lose Serious Money if Employers Paid 401(k) Contributions Once a Year

Workers Would Lose Serious Money if Employers Paid 401(k) Contributions Once a Year

17 Apr. 2014 | Comments (0)

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A worker who started out earning $40,000 and switched jobs seven times over the course of a 40-year career would lose $47,000 in lifetime retirement savings if all of her employers followed IBM’s example and paid 401(k) retirement contributions as lump sums on the last day of each year, according to a simulation performed for The New York Times. The reason: She would lose significant employer contributions to her retirement savings in the years when she switched jobs. Only a small percentage of companies have adopted “last day rules” on 401(k) contributions, but the number is expected to rise as companies look for new ways to save money.

SOURCE:  Beware the End-of-Year 401(k) Match

 

This blog first appeared on Harvard Business Review on 2/25/2014.

View our complete listing of Compensation and Benefits blogs.

     

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