My boss was so proud, he told me yesterday that he just maxed out his 401k for the year. Last year was the first year he had maxed it out and he bumped up his contribution this year. Now he was looking for what he should do with the "extra" money for the rest of the year (but that's a different story).
After congratulating him, I told him he was leaving money on the table by maxing out so soon. This is because our company match is determined by the percent of our paycheck, and not a percent of our year end pay. The ideal situation is to max out the 401k on the last pay period. He had a very hard time grasping this idea. I had to whip up a quick spreadsheet to show him. If I maxed out in October, I'd be missing out on about $2000 of match money
A second co-worker overheard our conversation. He was unaware of this anomaly as well. So, thought I'd share this story here in case anyone else is in the same situation.
After congratulating him, I told him he was leaving money on the table by maxing out so soon. This is because our company match is determined by the percent of our paycheck, and not a percent of our year end pay. The ideal situation is to max out the 401k on the last pay period. He had a very hard time grasping this idea. I had to whip up a quick spreadsheet to show him. If I maxed out in October, I'd be missing out on about $2000 of match money
A second co-worker overheard our conversation. He was unaware of this anomaly as well. So, thought I'd share this story here in case anyone else is in the same situation.