Do I have to contribute to my 401k?

Question

I work for a small law firm, and they said they would put 15% of my salary into a 401k but never mentioned that it would come out of my paycheck. Can they make contributions to a 401k for me with me ever investing any money myself? This just doesn't seem right to me.

Answer 1

You would have had to make a selection during your initial hire. After you are vested they should contribute a percentage of your contribution.

Investing into a 401K is never a bad idea and maximizing your contribution is a great idea. The difference in your take home after they take the 15% is not that much different if they did not take it. That is because it is removed before taxes are considered.

You should leave it!

Answer 2

You are not required to participate in a 401k program, although it is definitely in your best interest for retirement purposes. I would check with your employer to see if they are actually taking 15% out of your paycheck and matching a certain percentage of that.  Also talk to your Human Resources team to see if they have proof that you ever signed off for approval for them to remove funds like that from your check.

But again, you'll probably be happy in the long run that they're doing that. It'll be available to you when you're older :)

Good luck!

Answer 3

Well, of course it comes from your paycheck. That should have been obvious.

However, you don't have to continue if you don't want to. Recent changes in Federal law encourages employers to enroll new employees automatically in 401(k)s or other retirement plans, but you can opt out if you wish. Talk to your employer's personnel department.

Frankly, though, opting out of a retirement savings plan is one of the most foolish things anyone can do.

Answer 4

If they have a matching program, you will want to max out that match each year.

100% of all contributions to a 401(k) are pre-tax. This means it comes out of your pay check. The benefit to you aside from any matching, is that the amount of tax withholding and your overall annual tax bill will be less, since the pre-taxed earnings are not subject to income tax until you withdraw the money at retirement.

Investing in a company sponsored retirement plan is optional, and you have to sign papers to agree to it, and how much should come out of your pay check, either a percent or dollar amount, and how often.

Answer 5

That depends on the plan...I am a little unsure of the details of your plan (based upon what you have written).

Yes, you can be required to participate in some plans...However, that is a rare situation.  More typical is that you are automatically signed up and then you must opt out.  I find it difficult to believe that you are required to contribute 15%.  In required plans (which almost always have a 100% guaranteed contribution attached to them), a minimum of something like 2% from you is required...and then they put it 2% or 5% or 10%...whatever the guaranteed contribution is.

And, yes, the company can put money in without you putting in any of your money  (Guaranteed contribution plan).  But, again, this is not typical.  A match is much more common.  A match requires you put in money before the company will put in any in addition.  ("the match").