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A Common Mistake Of Overachieving 401k Investors

It is common knowledge that your company’s 401k match is free money. Unless you are struggling with high-cost debt, you should strongly consider “maxing out” your company’s match. What is maxing out? If your company matches the first 3% at 100%, then to max out your company’s match you must contribute 3% or more of your salary each month and/or year.

What many financially motivated employees don’t realize is that if they contribute too aggressively into their 401k, they could lose out on the free money!

Many plans will not look at the total yearly contribution as a percent of income and then match accordingly. They will only match a percentage on a month-to-month basis. Here is what I mean:

  1. Virginia (age 30) makes $120,000 a year / $10,000 per month
  2. Because she wants to retire at age 55, she elects to make employee contributions of 20%, or $2,000 per month into her employer’s 401k
  3. The employer will match 100% of the first 3% of her contribution
  4. The employer may only match 3% of $10,000, or $300 per month
  5. Because the employee will reach the NEW 2019 401k contribution limit of $19,000 after only 9.5 months (Virginia is very motivated!), they will miss out on 2 months of the employer’s match!
  6. She will only get a total match of $3,000 for 2019 instead of the $3,600 she is entitled to.
  7. Virginia is punishedfor her aggressive saving!

So when you financial aggressive (passive or otherwise) investors set up your 2019 401k contributions, make sure you get all the FREE money you can!

Here are the new 2019 401k, IRA, and HSA contribution limits:


For informational purposes only. Please consult your financial professional before making any decision. All information is believed to be from reliable sources. Mark Struthers and Sona Financial are not responsible for any error or omission.

Before you go beyond maxing out the company match, you should:

  1. Make sure your other financial ducks are in a row, like having an emergency fund
  2. Make sure other goals are funded, like that new roof or car
  3. Other account types are considered, like a Roth IRA

Sometimes, overachievers can become too focused on reaching the top of the mountain and not getting down the other side too. The goal is not to just max out a 401k but to be the best future financial versions of ourselves while still living for today.

So cheers to a fantastic 2019!

Stay financially classy Minnesota!

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