what does it mean when an employer contributes 2% of your 401K?

Question

Lets say I opt to take $100 out each pay period. Does this mean my employer will pay 2% of that $100? Leaving me to only pay $98 each pay period??

i know 2 % sucks..they have been really tight on the budget lately and i'm sick of hearing it! It DOES suck!!!!

So in other words, I put in $100 and they will contribute 2% on top of that leaving me with like $102?

Also, it's not taxed

Answer 1

Now, if I have it right it means...you put in a certain amount ( a percentage of your pay..5 % maybe) and your employer will " match" it ... but, in your case, up to 2% of your salary/wage. So you have to figure out what 2% of your pay is...and that's the most your employer will put in..regardless how much more than that that you put in.
No matter how small the amount is...it's something...and you're making 2% more than you did before...and 2% more than someone who doesn't add to the 401 plan.
Most importantly...IT WILL ADD UP...AND IT WILL MAKE MONEY FROM THAT MONEY...AND YOU WILL BE A WHOLE LOT BETTER OFF AT 60...

Answer 2

No, your employer's contribution *matches* yours - it doesn't replace yours. The percentage is of your total/gross/pre-tax paycheck.
So if you opt to save 1% of your total paycheck, your employer will contribute an additional amount equalling that 1%. If you opt to save 2%, your employer will contribute an additional amount equalling that 2%. So it's free, additional money for you.
If you opt to save MORE than 2% of your paycheck (and ideally, you should be saving at least 10% of your paycheck to your retirement), then your employer will not contribute more than the 2%.

2% isn't great - the national average is 3%, but many companies don't offer any retirement plan at all, so it's better than nothing. You definitely need to be saving way more than that regardless of whatever free contribution the employer offers. What you do now will have a HUGE impact on your retirement, and it's nearly impossible to make up for it later.

Answer 3

It will be an additional $2.00 (you've now got $102 working for you).

but.... it's IS tied to what you contribute. There will be a number at which contributions will no longer exceed a certain benchmark. The 2% is a good contribution rate. Many companies give no extra contribution.

Make sure you increase your deduction amount every time you get extra income. Best bet is to have your deduction as a percentage of your salary.

If you make $1,000 a week, and have 10% taken out, that would = $100.

If later you make $1,050 a week, and have 10% taken out, that would = $105.

Answer 4

Usually, what it means is that they will contribute 2% of your salary to the 401k. Which translates to 2% of each paycheck pre-tax. This is not tied to whatever you may be contributing. So if you make $100 per paycheck before taxes, they will put $2(extra) in your 401K. Then whatever you decide to contribute gets taken out of your check, then you get taxed, then you get what's left.

You should check to make sure this isn't a MATCH though, where they don't contribute anything unless you do it first. In that case, you would have to put in the 2% first and then they will match 2% on top of that. In this case, if you decide NOT to put in the 2%, you don't get squat.

Answer 5

Hey, 2% is better than nothing, right? It's free money that you didn't have to work for. And if you were to take $100 out of your paycheck and put it into your 401(k), your employer would match 2% of what you contributed, so after you put $100 dollars in, they would put $20 in. Pretty cool, huh?

Answer 6

No what that means is what ever you put in, they will contribute that percentage of their own money to your 401 K. By the way 2 % sucks thay should do more than that.