A reader asked a great question yesterday in response to my last post about frontloading my retirement accounts. In terms of the company match for my 401(k), do I get more or less money if I fully fund my account within the first 6 months vs. over the course of the entire year?
According to our company website, eligible employees "receive dollar-for-dollar matching contributions...on the first 5% of...benefits pay contributed each pay period." As far as I can tell, there's no dollar cap associated with each paycheck. So, if I contribute the full $15,000 (the 2006 tax limit) in 12 pay periods, as opposed to 24, the company match would still be $750 (5% of that $15,000) for the year. And since the company match is deposited in my 401(k) account immediately, there's the added benefit of time. That $750 will be earning compound interest or dividends for me for at least an additional 6 months.
So, if my reasoning is correct, there's really no down side to frontloading my 401(k) when it comes to the company match.