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Maximize your company's Employer Match

Posted by Jill Boynton  December 26, 2008 10:00 AM

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The IRS recently announced the contribution limits for various retirement plans for 2009. The table below outlines the limits for the most popular types of retirement plans.

IRA: Contribution limit: $5,000 Catch-up limit: $1,000
Roth IRA: Contribution limit: $5,000 Catch-up limit: $1,000
401(k), 403(b): Contribution limit: $16,500 Catch-up limit: $5,500
SIMPLE IRA: Contribution limit: $11,500 Catch-up limit $2,500

Some individuals like to “front-end load” their retirement plans by contributing enough during the first 9-10 months of the year to reach the maximum, then stopping contributions during November and December to increase their income for Christmas. If your company matches contributions, you will likely miss out on some free money if you adopt this strategy. Here’s why:

Most company matches are a formula based on your income during the pay period. For instance it might be a match of $1 for each $1 contributed, up to a maximum of 3 percent of pay. If your weekly pay is $500 and you contribute $50 to your 401(k), your employer will add $15 (3 percent of $500.) Over 52 weeks your employer will add $780 to your 401(k).

But what if you increase your contributions to $60 and contribute for 44 weeks? You will put in about the same amount of money overall and each week your employer will add their $15. Even though you increased your contribution your employer did not, because the most he will add is $15. So you lose out on 8 weeks of employer contributions, or $120 of free money because you stopped contributing after 44 weeks.

Contact your Human Resources Dept. in early January to adjust your contributions to the maximum for 2009, and be sure to contribute every pay period to get the most company match.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

About the contributors

D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of, a credit card and gift card marketplace, and, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

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