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401(k) Matching: Are Year-End Matches a Ripoff?

401(k) plans help millions of workers save for retirement. But 401(k)s have been controversial, and a recent proposed move from AOL (NYSE: AOL.DL  ) to change its matching policy to a once-annual match resulted in a firestorm of criticism that led the company to reverse course.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at annual year-end matching contributions and why they matter. The concern that workers have is that waiting to match costs them the investment gains on matches throughout the year, and raises the concern that if you quit before the end of the year, you could end up getting no match at all. Dan notes that even though AOL has changed its mind, one study shows that 17% of employers do annual matching contributions, including Morgan Stanley (NYSE: MS  ) , JPMorgan Chase (NYSE: JPM  ) , and Citigroup (NYSE: C  ) , according to reports from workers. Dan concludes that if a once-annual match is the only way to get any match, it's good -- but not as good as getting regular contributions with every paycheck.

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  • Report this Comment On February 16, 2014, at 10:57 AM, lngtrmcptlgns wrote:

    My company does annual matches. I've often wondered if I quit before the match, do I still get part or all of it.

    Do you have any suggestions for making the right kind of persuasive pitch to my company to change this? Is there anything in it for them (to change away from the annual match to a regular one)?

    They have been responsive in the past - they recently started offering a Roth 401k option, which is something I personally requested.

    Also, I think our match is fairly generous: dollar-for-dollar through 3% and then 50 cents on the dollar for the next 2% (or put another way, 80 cents on the dollar through 5%).

    My company is one of the 100 largest privately held companies in the US, if that makes any difference to your answer.

    Thanks for addressing this issue, Dan!

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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