Free Money For Workers That Are 59.5+
June 1, 2009 – 5:42 am
It’s not a big surprise that some people don’t contribute to their 401k. Likewise I’m sure that some people that contribute, but don’t contribute to get the full company match. In fact, a 2008 survey of 1 million 401k portfolios by Financial Engines found that 1/3 of participants failed to receive their full employer match. I’m glad to hear that, due to the pension protection act of 2006, employers can now auto enroll new employees in retirement accounts.
What I’m curious about, however is how many people 59 1/2 and older that fail to get the full company match. At 59 1/2 you can make withdrawals from a qualified plan without having to pay a 10% penalty for early withdrawal. Let’s say you’re a 60 year old person who earns $50,000 per year. Your company has a 50% match on the first 6% of your salary you contribute. Like the other employees that have your pay but are younger, if you contribute $3,000 your company will give you an additional $1,500 per year.
The cool thing about being 59 1/2, among other things like having grandchildren, is that you can withdrawal this money immediately (if you’re vested in your plan that is). So even if you think you can’t afford to contribute 6% to get the full company match, you can. Just invest 6% and then pull some or all of that 6% plus the company match 3%. Free money. Or am I missing something?
Clearly 33% of people don’t capture the full company match, perhaps because the feel they can’t afford to invest. If you know of someone in this category please let me know how to get this free money!!!
Image Credit: kugelfish
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