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Employer matching contributions in 401k
Old 08-20-2013, 01:33 PM   #1
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Employer matching contributions in 401k

When communicating an annual return % in one's 401k plan, is it common to define the employer's match funds as part of one's return or is this contribution counted as part of the base amount just like my contributions?
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Old 08-20-2013, 02:21 PM   #2
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Back when I was working and had a 401k, I kept track of both types of returns - the more conventional ones based on the rate of return for each fund the 401k was invested in, and a combined rate of return overall funds. But I also had a few extra columns in my spreadsheet which showed me the rate of return for each fund classifying the employer match as an investment "return." I did that only on an annual basis (latest 12 months), not the many other rates of return I kept track of in the funds-only type.
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Old 08-20-2013, 02:34 PM   #3
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For investment performance analysis I treat it as a contribution. Although it acts as a benefit/return I don't want to muddy my look at fund and overall portfolio returns. I guess I could look at it both ways, but it wouldn't change my investment strategy so I don't bother.

I do, however, look at it as return in the sense that I always max out our 401k contribution to get the full match (my DW's match is very generous).
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Old 08-20-2013, 03:03 PM   #4
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Communicating from whom, to whom, for what purpose?

1) If I'm talking to myself about whether I should be in a 401k at all, I might say something like "My employer match is an instant, one-time 50% return on each of my contributions". That helps me understand why 401ks are usually good deals, even if the funds aren't the greatest. If I were talking to someone who might take my advice, I might say something similar.

2) If I'm talking to myself about which funds I should be in, I'll ignore the employer match.

3) If the funds are so bad that I'm beginning to think the conventional wisdom in #1 may not apply, I'll sit down and do an actual calculation of how long it would take me to make up the difference if I just took my salary and invested in an outside fund. In that case, I certainly include the match in the calculation.
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Old 08-20-2013, 03:19 PM   #5
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If the funds are so bad that I'm beginning to think the conventional wisdom in #1 may not apply, I'll sit down and do an actual calculation of how long it would take me to make up the difference if I just took my salary and invested in an outside fund. In that case, I certainly include the match in the calculation.
+1 I'm lucky. DW's 401k has excellent choices, but if it didn't the match would certainly be a factor.
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Old 08-20-2013, 04:17 PM   #6
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Originally Posted by Willers View Post
For investment performance analysis I treat it as a contribution. Although it acts as a benefit/return I don't want to muddy my look at fund and overall portfolio returns. I guess I could look at it both ways, but it wouldn't change my investment strategy so I don't bother.

I do, however, look at it as return in the sense that I always max out our 401k contribution to get the full match (my DW's match is very generous).
+1
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Old 08-20-2013, 05:16 PM   #7
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+1
+2 I viewed it as an additional part of my compensation that was not currently taxable and was part of my 401k contributions. I did not consider it part of investment return.
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Old 08-20-2013, 11:11 PM   #8
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Originally Posted by Newventurer View Post
When communicating an annual return % in one's 401k plan, is it common to define the employer's match funds as part of one's return or is this contribution counted as part of the base amount just like my contributions?
I treat the match as part of contribution.
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Old 08-21-2013, 01:17 PM   #9
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Part of the contribution. In Quicken it looks like income that is then invested.
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Old 08-22-2013, 03:44 PM   #10
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It is income to me. Part of the total compensation package, what MegaCorp A (total compensation) pays is weighed against what what MegaCorp B might offer (total compensation) for similar services. Returns are determined by my choices after the contribution is on the books.
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