Weekly Market Recap This week saw further volatility in the oil price, as has been a theme of recent weeks. US manufacturing activity contracted for the 4th consecutive month based on survey data in January, though US consumer income increased in December. Overseas, German unemployment fell to a new low of 6.2%, hitting the its lowest level since German reunification.
This week we want to remind you of the potential value of 401(k) matching if you're an employee. 401(k) matching can boost your savings rate, and approximately 60% of employers offer a matching program. For many, 401(k) matching means that, for every dollar you put into your retirement plan, your employer will ultimately also put in a dollar.
Matching can improve the return on your 401(k) investment even before any tax benefits which 401(k) plans can also offer. However, also note that 401(k) matching can vest over time. This means that you may only receive any matching benefits over a period of years, and when you leave your employer some matching benefits may be lost. So, if you do have a 401(k) from your employer, then your ability to take advantage of 401(k) matching benefits is something to investigate. This can be true even in cases where your 401(k) fees are a relatively high or the fund options more limited, simply because the matching itself can be valuable.
There are limits to 401(k) matching in terms of the level of contributions your employer will match up to, often around 4% of salary, and whether it's simple dollar for dollar matching on offer or something lower. However, if your employer came to you with a 4% pay rise, it's unlikely you'd pass because you didn't fill out the paperwork. However, with 401(k) matching many workers may be in a similar situation by not taking advantage of the money that their employer is offering. Make sure that you are aware of your options on 401(k) matching, and that you aren't letting a potentially good deal pass you by. Also remember that any employer 401(k) match does NOT count towards your annual deferral limit (currently $18,000 for those under age 50). Also of note, even if you elect Roth 401(k) contributions, employer matching dollars are always Traditional contributions, as required by law.
Notes:
US Manufacturing:
http://ism.files.cms-plus.com/ISMReport/MFG_JAN_16_Final.pdf
US Personal Income:
http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
German unemployment:
http://www.bloomberg.com/news/articles/2016-02-02/german-unemployment-rate-falls-to-record-low-as-job-market-booms
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