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WHERE DO YOU WANT YOUR MONEY TO TAKE YOU TODAY?

297

An employer who makes contributions to an employee’s plan will do so in a set proportion of the employee’s contribution up to a max- imum percentage. The money contributed will then be deposited with a trustee, who will it them in various types of securities, such as stock and bond funds and the stock of the employing company. These plans also offer a much more liberal vesting period than other plans do. Typically, an employee is 100-percent vested in the employer’s contributions as soon as the contribution is made. Thrift and savings plans also have looser policies regarding withdrawal of funds and cessation of participation. Be careful, though, because there is usu- ally a waiting period to reenter the program once you have stopped participating.

For example, you participate in your company’s thrift and sav- ings program. Your annual salary is $60,000 and you put 10 per- cent, or $6000, per year into your plan. Your employer will match any contribution you make at 75¢ on the dollar up to 6 percent of your salary. Your employer’s contribution to your plan would be $3600.

EMPLOYER’S THRIFT AND SAVINGS PLAN CONTRIBUTION

$60,000

75¢ $6,000

= $4,500

6% of $60,000

= $3,600

Employer’s contribution

= $3,600

Total contribution

= $9,600

Employee’s salary

= $60,000

Employee’s contribution Employer’s contribution

= $6,000 = 75¢ for every $1 up to 6% of

Although the fact that an employee’s contribution is counted as part of his or her annual income remains a disadvantage of the thrift and sav- ings plans, if you have access to one at your work, I would advise that

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