80¢ raise

What are you going to do with the money?


  • Total voters
    60
  • This poll will close: .

MrBates

Well-Known Member
Makes sense.
Say I'm already giving 5% at what I'm making now.
When i get a raise, that 5% increases because my gross pay increases.
I've never thought of it that way. Like a bigger slice of pizza. I'm definitely getting the Mercedes fully loaded then.
 

Just A UPS Guy

Well-Known Member
Let me answer @542thruNthru question.
Say you made $1,000 each week and you contributed 10% to 401K; that would be $100 each week. Now if you got a $100 raise, your check would now be $1,100 each week, minus 10% to 401K which is now $110. So, you are only giving $10 of your $100 raise to your 401K. Your check would be $90 more each week and you would certainly spend it each week.

On the other hand, if when you get your $100 raise, you were to raise your contribution to say 15%. That would amount to $165 (15% of $1,100 = $165) towards your 401K each week. So, your check would be $35 more each week than what you were used to before the raise; and your 401K would see $65 more each week.

So, by doing nothing, you only contribute $10 more to your 401K. But by changing your contribution %, your contribute $65 more. And if you do that at a time when you get a raise, you don’t feel the increase to 401K because it was money you weren’t used to making before the raise; and the cherry on top is that you would still see a $35 raise on each check take home pay.
Your math is solid, except, when applied to our real-world situation it's a bit ambitious. We don't get 10% raises, more like around 2%.

So, you throw in some OT and you have about a $40 raise. Up your contribution 1% and you can see both 401k and your wallet grow, but it's far less dramatic than your example for sure.

That said, put it in a 457 or something similar so you can get to it if needed before you're 59.5 without penalty. The company doesn't match anything, so you don't lose anything by choosing your own investment track.
 
Your math is solid, except, when applied to our real-world situation it's a bit ambitious. We don't get 10% raises, more like around 2%.

So, you throw in some OT and you have about a $40 raise. Up your contribution 1% and you can see both 401k and your wallet grow, but it's far less dramatic than your example for sure.

That said, put it in a 457 or something similar so you can get to it if needed before you're 59.5 without penalty. The company doesn't match anything, so you don't lose anything by choosing your own investment track.
A 457 plan is for government and non profit employees.
You can take withdrawals from your 401k at age 55 without penalty if you are retired.
 
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