Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Young bucks - How and why your 401(k) is changing
Old 02-07-2013, 07:44 AM   #1
Recycles dryer sheets
SumDay's Avatar
 
Join Date: Aug 2012
Posts: 482
Young bucks - How and why your 401(k) is changing

Quote:
NEW YORK, Feb 6 (Reuters) - Employers are getting smarter about how they run retirement plans. They are making some moves that are good for younger workers, including automatically enrolling new employees in 401(k) plans and defaulting their savings into target-date funds, which offer an investment mix designed to meet retirement goals.

Other choices are raising eyebrows, including International Business Machine's decision to make its 401(k) matching contribution only once a year.

David Huntley, principal at HR Consultants in Baltimore and publisher of "The 401(k) Averages Book" talks about these and other trends.
YOUNG BUCKS - How and why your 401(k) is changing | Reuters
__________________

__________________
SumDay is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-07-2013, 07:57 AM   #2
Thinks s/he gets paid by the post
 
Join Date: May 2005
Location: Texas
Posts: 1,038
People will quit right after the payout. Future layoffs will be right before the payout.
__________________

__________________
In theory, theory and practice are the same. In practice, they are not.
Lazarus is offline   Reply With Quote
Old 02-07-2013, 08:37 AM   #3
Dryer sheet wannabe
 
Join Date: Oct 2007
Posts: 11
What a terrible trend. I'd certainly leave as soon as the payout occurs. Makes recruiting and retention difficult with swathes of people leaving simultaneously.
__________________
earlyguy07 is offline   Reply With Quote
Old 02-07-2013, 08:46 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Posts: 6,878
Quote:
Originally Posted by Lazarus View Post
..... Future layoffs will be right before the payout.
and the class action lawsuits will follow.

IBM is stupid and short-sighted.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is online now   Reply With Quote
Old 02-07-2013, 09:02 AM   #5
gone traveling
 
Join Date: May 2012
Location: Fairfax, VA
Posts: 211
I guess I'm a "young buck". I would never w*rk for a company that did 401k match payouts once a year. That is just plain silly.

I guess the auto-enrollment is a good idea, but that doesn't really apply to folks who actually know the benefit for a 401k.

You know how I wish 401k's would change? I wish that employees could choose any provider, and that you weren't locked into whichever provider your employer used. Service fees (for the employer) should be on an individual basis to allow this.
__________________
bo_knows is offline   Reply With Quote
Old 02-07-2013, 11:47 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,337
Quote:
Originally Posted by bo_knows View Post
I would never w*rk for a company that did 401k match payouts once a year.
Bo, I sincerely hope that you do not have to eat those words in the future.

Never is a long time.
__________________
Rustward is offline   Reply With Quote
Old 02-07-2013, 04:54 PM   #7
Moderator Emeritus
 
Join Date: May 2007
Posts: 9,985
DW's company pays out the 401K match on the last day of the year. I don't think it's a big deal. We think she's fortunate to receive a 401K match at all. Bonuses are paid once a year too, and the amount is generally much higher. No one seems to get worked up about that.
__________________
FIREd is offline   Reply With Quote
Old 02-07-2013, 04:58 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,337
Quote:
Originally Posted by Lazarus View Post
People will quit right after the payout. Future layoffs will be right before the payout.
I know of employers that pay the match for employees who have terminated as long as they are still in the plan on the payout date.
__________________
Rustward is offline   Reply With Quote
Old 02-07-2013, 05:00 PM   #9
Recycles dryer sheets
 
Join Date: Jun 2011
Posts: 127
The only two companies I've worked for matched once per year. The first one was back in 2002.

These are both well-respected financial services companies that have always had hundreds of applicants per open position. Did not impact recruiting or retention.
__________________
Marathoner is offline   Reply With Quote
Old 02-07-2013, 05:05 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Posts: 6,878
Quote:
Originally Posted by FIREd View Post
DW's company pays out the 401K match on the last day of the year. I don't think it's a big deal. We think she's fortunate to receive a 401K match at all. Bonuses are paid once a year too, and the amount is generally much higher. No one seems to get worked up about that.
Would you think it is not a big deal if DW resigned or was laid off a week before the end of the year?

I think bonuses are different in that they are typically not formulaic based on judgement of performance or even where they are they are formulaic their payment is commonly based on meeting certain bogies for the recently ended fiscal year.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is online now   Reply With Quote
Old 02-07-2013, 05:08 PM   #11
Moderator Emeritus
 
Join Date: May 2007
Posts: 9,985
Quote:
Originally Posted by pb4uski View Post
Would you think it is not a big deal if DW resigned or was laid off a week before the end of the year?
No I would not. The 401K match is paid at her employer's discretion. They owe us nothing.
__________________
FIREd is offline   Reply With Quote
Old 02-07-2013, 05:13 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Posts: 6,878
Quote:
Originally Posted by FIREd View Post
No I would not. The 401K match is paid at her employer's discretion. They owe us nothing.
I guess it is one thing if it has always been done that way. To me, the most objectionable thing in IBM's case is a change from an employee friendly approach to a less employee friendly approach.

I wonder how much they will "save" with the new approach and if the benefits exceed the intangible costs (including the bad press they have received as a result of the changes).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is online now   Reply With Quote
Old 02-07-2013, 05:20 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Apr 2012
Location: San Diego
Posts: 1,382
It would give me pause if my employer switched to annual match deposits.
Profit sharing is a different thing - that's more like bonuses. But the salary match should go in at the same time as the salary payroll deductions...

My employer pays an annual bonus. It is formulaic. Except they've stopped following the formula. Even the higher management is calling foul on the fact that "bogey's" were exceded but the payout is smaller than the formula.

In previous years (decades) they would pay out even if you'd left the company after the end of the year, but before the pay out. That changed last year.

I expect a LARGE exodus after the payout this year for a variety of reasons. Payout is next month and I know several who are already interviewing. I'm sure there are more I don't know about.

If the company touts 401k match and bonus as part of their "total compensation" - then they have to expect disgruntled employees if they mess with it. Especially if the base salary is lower but these other compensations bring them to market rate.
__________________
rodi is online now   Reply With Quote
Old 02-07-2013, 05:43 PM   #14
Thinks s/he gets paid by the post
 
Join Date: May 2005
Location: Texas
Posts: 1,038
Quote:
Originally Posted by FIREd View Post
No I would not. The 401K match is paid at her employer's discretion. They owe us nothing.
What a great employee! Willing to work for free!

The 401K and or Pension IS part of your pay. Willing to give a paycheck or two back for the good of the company?
__________________
In theory, theory and practice are the same. In practice, they are not.
Lazarus is offline   Reply With Quote
Old 02-07-2013, 05:51 PM   #15
Moderator Emeritus
 
Join Date: May 2007
Posts: 9,985
Quote:
Originally Posted by Lazarus View Post
What a great employee! Willing to work for free!

The 401K and or Pension IS part of your pay. Willing to give a paycheck or two back for the good of the company?
I guess we don't feel as entitled as you do.
__________________
FIREd is offline   Reply With Quote
Old 02-07-2013, 07:44 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Jun 2007
Posts: 1,910
Lots of matches have vesting schedules. Are you saying you would never work for those companies either? Or they have high ER funds. No working for them too? Imperfect 401k plans seem pretty common. I just try to figure how to make the best of it. At least the annual match is automatically trued up. No hassle to insure you have contributions in each and every paycheck.
__________________
growing_older is offline   Reply With Quote
Old 02-07-2013, 07:51 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Jun 2010
Posts: 1,156
I worked for a company that did 401k matching once a year and frankly it sucked. But you have to look at your overall compensation. Although the 401k matching was terrible, they made up for it in salary / bonus.
__________________
photoguy is offline   Reply With Quote
Old 02-07-2013, 11:03 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 1,618
The once a yr employee contribution violates the principle of regular and consistent savings. It sends the wrong message to employees and negates the advantages of dollar cost averaging. It should be paid as it is earned. I think it's just a way for employers to save a few bucks by holding the contribution on thier books.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.
jazz4cash is offline   Reply With Quote
Old 02-08-2013, 04:43 AM   #19
Moderator
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 13,431
Quote:
Originally Posted by jazz4cash View Post
The once a yr employee contribution violates the principle of regular and consistent savings. It sends the wrong message to employees and negates the advantages of dollar cost averaging. It should be paid as it is earned. I think it's just a way for employers to save a few bucks by holding the contribution on thier books.
DH's company solved this thorny issue of when to make the match by stopping making the match at all.
__________________
In saying what is obvious, never choose cunning. Yelling works better. --Cynthia Ozick
Bestwifeever is offline   Reply With Quote
Old 02-08-2013, 04:57 AM   #20
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Just chillin' down by the river
Posts: 14,332
Some additional thoughts from our last discussion on this IBM switches 401k match to annual lump sum
The effort to reduce costs is decades long, this is just one more small step, and it is ongoing. It increases profitability, which helps drive equity prices higher, which benefits most of us here.

Seems to me that whatever policy an employer has, it is one more factor to take into consideration for retirement planning, and only reinforces the fact that our retirement is our responsiblity.
__________________

__________________
So far so good
MichaelB is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 08:40 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2014, vBulletin Solutions, Inc.

Early Retirement News right to your Email!

Stay up-to-date with all the latest news to your inbox!

unsusbcribe at anytime with one click

Close [X]