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Salary and 401k Advice
Old 02-24-2011, 11:02 AM   #1
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Salary and 401k Advice

The Good News: I am in line for a decent raise at work (in the $10k range) later this year.

The Bad News: My 401k contributions are already maxed out and my employer only matches up to 1% of my annual salary.

I am thinking of trying to negotiate my raise such that it would increase the employer match in my 401k to around 10% (lets say around $8k) and have the balance of the raise go to increasing my salary. This would reduce the tax burden of my raise and effectively increase the annual funding to my 401k. From what I have gathered, the employer contributions do not count towards the $16,500 contribution limit, so raising that amount is the only way you can increase funding to your 401k beyond the max contribution.

I am wondering if anyone has experience negotiating a pay raise or a salary package in the form of an increase in the employer 401k contribution? Interested in the both the financial implications perspective and the employer negotiation perspective.

Thank you!
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Old 02-24-2011, 11:20 AM   #2
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Congrats on the big raise. The 401K matching policy, I think, is not negotiable.
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Old 02-24-2011, 11:20 AM   #3
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The rules for 401k plans are many. They are set up so that everyone gets treated in a similar manner. They don't want the high income types to get the Lions share of the benefits.

So based on what I know (and maybe that's not so much), I would be really surprised if they could give you personally a higher match rate than anyone else.
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Old 02-24-2011, 11:31 AM   #4
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401k match, at any company that I've worked for, is not negotiable.
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Old 02-24-2011, 12:24 PM   #5
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Here's a sample of the thing your HR dept would think about: 401k Testing Options for Small Businesses
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Old 02-24-2011, 01:53 PM   #6
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Why not ask for stock options instead? Then you don't have to pay until you cash in.
TJ
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Old 02-25-2011, 11:20 AM   #7
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Thank you for the input everyone. I feared that it would likely be non-negotiable. 1% just seems like such a small amount, but I supoose it's better than nothing, which was the employer contribution for the past 2 years.

I work for a small consulting firm that's not publicly traded, so I don't think stock options are an option.
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Old 02-25-2011, 12:22 PM   #8
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I think it's a very good out-of-box idea and most people probably assume it cannot be done but not necessarily know... Do you have anything to lose by asking?

I think it's more likely they will go for it in a smaller firm than in a larger one, but it may not hurt to ask in either case.
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Old 02-25-2011, 12:43 PM   #9
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you can put the excess in roth ira instead (up to $5k or $6k if over age 50) if you haven't maxed that out and if you're eligible
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Old 02-25-2011, 05:42 PM   #10
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I think it's a very good out-of-box idea and most people probably assume it cannot be done but not necessarily know... Do you have anything to lose by asking?
If this is a small company, you might find opportunity to negotiate some out of the box ideas for compensation that is more valuable to you and less costly to the company. Changing 401k matching rules is not that opportunity. It is prohibited. It would get the company in a lot of trouble if they did it. If you want to be known as someone who is well informed, then you should not waste your time and theirs with suggestions that are impossible. In this rare case, you do have something to lose by asking, your credibility. Small companies often have flexibility in vacation time, expense reimbursements for education or work related equipment or other not so out of the norm compensation. Or you can go back to the drawing board to think of other outside the box ideas. You probably don't want to start asking for impossible 401k changes.
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Old 02-28-2011, 09:30 PM   #11
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This is exactly the kind of advice I came here for. I want to make sure that when the negotiation begins I am making informed suggestions and not sounding like an idiot.

I'm leaning towards the Roth idea. I don't have any Roth investments and though it will not lower my taxable income, it's another way to put some money away to grow tax free.

Thank you all for the input.
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