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You have just started a new job and are thrilled to learn that your new employer offers a 401(k) retirement plan to its employees.

 

You have just started a new job and are thrilled to learn that your new employer offers a 401(k) retirement plan to its employees. Your annual salary is $90,000. Assume the IRS allows you to contribute up to $15,000 annually to your 401(k). You've decided to contribute 15% of your annual salary to the plan. Questions: 1. How much more money would you need to contribute to meet the maximum allowable contribution set forth by the IRS? 2. The company offers you a $.50 match for each dollar that you contribute, but only up to 8% of your salary. For example, if 7% of your salary is equal to $5,000 and you annually contribute this amount, your company would only match $.50 for every dollar of the $5,000, or $2,500. Based on this information, how much is the total match payout provided by your company? 3. Is this a defined benefit plan or defined contribution plan? Why?

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