4 ms·

I'm sad more companies don't up their 401k contributions, most people don't realize their employer can put in 40k a year (!!!) into an employee's 401k. Due to t

I'm sad more companies don't up their 401k contributions, most people don't realize their employer can put in 40k a year (!!!) into an employee's 401k. Due to the wonders of tax law, that is equiv to 60k cash, and that isn't counting the earnings or the flexibility to reallocate 401k investments w/o having to pay taxes on earnings when changing where the money is invested.

tshaddox 4y ago
> Due to the wonders of tax law, that is equiv to 60k cash And equivalent to 0 cash for paying the rent. I suspect that’s why it doesn’t seem to be a prominent concern in discussions about tech compensation.
- afrodc_ 4y ago
  I don't know about you, but with tech salaries, rent is the least for my concern. I think that's true for most people that don't live in ridiculously high cost of living areas.
  - tshaddox 4y ago
    Perhaps, although until COVID (and we'll see what happens with remote work compensation in the long term) nearly all people with huge big tech compensation packages lived in ridiculously high cost of living areas. I suspect a very large portion still do. In the Bay Area I've heard no shortage of stories of couples/families with two big tech salaries still spending very large portions of their paychecks on rent/mortgage.
- deelowe 4y ago
  BS. There's nothing stopping you from maxing your 401k and then pulling it back out taking the penalty. This applies to a ton of benefits people naively don't take advantage of from HSAs to employee stock purchase plans to 401k. It's almost always beneficial to maximize your tax advantaged accounts even if you're paying penalties on the back end.
nfriedly 4y ago
Seriously! I've considered going back to contracting just so that I could fully fund a 401k account.
- granshaw 4y ago
  Solo 401ks are a thing of beauty
snuxoll 4y ago
One benefit of not working for Big Tech and instead for a privately held company, instead of stock grants I get 120% match up to 6% of my salary and an annual 4% profit sharing bonus into my 401(k). Sure, my actual salary could be higher working for a "proper" tech company, but I get more employer contributions into my retirement savings than the Google's, Microsoft's, and Amazon's of the world will give to an employee capping their contributions.
- nostrademons 4y ago
  It's hard to see how this would beat Big Tech, where the standard match is 100% up to the 401k limit ($20,500) irrespective of income. Say your salary is $200K at private company, would be $240K at Big Tech. You'll be getting 1.2 * 0.06 * 200 = $14.4K in matching funds. The Big Tech employee would stash the full $20.5K into their 401K, get $20.5K match, and then end up about $35K ahead on post-retirement income.
  - snuxoll 4y ago
    You might want to go check the match of the big tech companies again. Google: Greater of 100% up to $3000, or 50% up to contribution limit (whichever is greater) Amazon: 50% up to 4%, vests after 3 years Microsoft: 50% up to contribution limit Facebook: 100% up to half of limit, 50% for the rest Netflix: 100% up to 4% I also don't just get the 120% up to 6%, I also get a fixed 4% of my salary contributed every year. So it's a hyothetical 200 * .06 * 1.2 = 14.4 200 * .04 = 8 14.4 + 8 = 22.8
    - nostrademons 4y ago
      Still have trouble seeing how this comes out ahead. Say you're at Google or Microsoft where it's 50% up to contribution limit, and you get $10K in match. That puts you down $12.8K vs. your hypothetical. If you're getting paid $45K more at the FANG, you pay 35% taxes on it, which puts you $30K ahead after-tax, and then you invest that in an after-tax 401k (or even just a normal investment account), after which you're in exactly the same situation but about $17K ahead each year.
pnw 4y ago
If Microsoft put 40k a year into everyone’s 401k they would immediately trip the Highly Compensated Employee test and have the IRS breathing down their necks.
- joshuamorton 4y ago
  If microsoft put 40K a year into everyone's 401k it would be impossible for them to violate the HCE test, as every you'd have non-HCEs with a 401k contribution of 30% or higher, something which HCEs are literally unable to match.

tshaddox 4y ago

> Due to the wonders of tax law, that is equiv to 60k cash And equivalent to 0 cash for paying the rent. I suspect that’s why it doesn’t seem to be a prominent concern in discussions about tech compensation.

afrodc_ 4y ago
I don't know about you, but with tech salaries, rent is the least for my concern. I think that's true for most people that don't live in ridiculously high cost of living areas.
- tshaddox 4y ago
  Perhaps, although until COVID (and we'll see what happens with remote work compensation in the long term) nearly all people with huge big tech compensation packages lived in ridiculously high cost of living areas. I suspect a very large portion still do. In the Bay Area I've heard no shortage of stories of couples/families with two big tech salaries still spending very large portions of their paychecks on rent/mortgage.
deelowe 4y ago
BS. There's nothing stopping you from maxing your 401k and then pulling it back out taking the penalty. This applies to a ton of benefits people naively don't take advantage of from HSAs to employee stock purchase plans to 401k. It's almost always beneficial to maximize your tax advantaged accounts even if you're paying penalties on the back end.

nfriedly 4y ago

Seriously! I've considered going back to contracting just so that I could fully fund a 401k account.

granshaw 4y ago
Solo 401ks are a thing of beauty

snuxoll 4y ago

One benefit of not working for Big Tech and instead for a privately held company, instead of stock grants I get 120% match up to 6% of my salary and an annual 4% profit sharing bonus into my 401(k). Sure, my actual salary could be higher working for a "proper" tech company, but I get more employer contributions into my retirement savings than the Google's, Microsoft's, and Amazon's of the world will give to an employee capping their contributions.

nostrademons 4y ago
It's hard to see how this would beat Big Tech, where the standard match is 100% up to the 401k limit ($20,500) irrespective of income. Say your salary is $200K at private company, would be $240K at Big Tech. You'll be getting 1.2 * 0.06 * 200 = $14.4K in matching funds. The Big Tech employee would stash the full $20.5K into their 401K, get $20.5K match, and then end up about $35K ahead on post-retirement income.
- snuxoll 4y ago
  You might want to go check the match of the big tech companies again. Google: Greater of 100% up to $3000, or 50% up to contribution limit (whichever is greater) Amazon: 50% up to 4%, vests after 3 years Microsoft: 50% up to contribution limit Facebook: 100% up to half of limit, 50% for the rest Netflix: 100% up to 4% I also don't just get the 120% up to 6%, I also get a fixed 4% of my salary contributed every year. So it's a hyothetical 200 * .06 * 1.2 = 14.4 200 * .04 = 8 14.4 + 8 = 22.8
  - nostrademons 4y ago
    Still have trouble seeing how this comes out ahead. Say you're at Google or Microsoft where it's 50% up to contribution limit, and you get $10K in match. That puts you down $12.8K vs. your hypothetical. If you're getting paid $45K more at the FANG, you pay 35% taxes on it, which puts you $30K ahead after-tax, and then you invest that in an after-tax 401k (or even just a normal investment account), after which you're in exactly the same situation but about $17K ahead each year.

pnw 4y ago

If Microsoft put 40k a year into everyone’s 401k they would immediately trip the Highly Compensated Employee test and have the IRS breathing down their necks.

joshuamorton 4y ago
If microsoft put 40K a year into everyone's 401k it would be impossible for them to violate the HCE test, as every you'd have non-HCEs with a 401k contribution of 30% or higher, something which HCEs are literally unable to match.