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Comment by junar | Hacker News Reader

If your employer offers a match in their 401(k) plan, it's generally better to contribute as much as possible, at least until you maximize the match.

Keep in mind that the limits can only increase by $500 increments. $6500 / $6000 ~= 1.083, which is still a larger fraction than $20500 / $19500 ~= 1.051.

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Well that would explain it. Is there any reason they can only do it in $500 increments? That's a weirdly arbitrary rule when money is in fact deliberately designed to be divisible.

The rounding is baked into the law.

> I.R.C. § 219(b)(5)(C)(ii) Rounding Rules — If any amount after adjustment under clause (i) is not a multiple of $500, such amount shall be rounded to the next lower multiple of $500.

https://irc.bloombergtax.com/public/uscode/doc/irc/section_2...

There is absolutely no reason the law was written to limit IRA to $6k while 401k is $20.5k other than to give larger employers or other employers who can afford administering 401k an advantage over smaller employers who cannot.

A married couple with both working at companies offering 401k gets to save $40k+ pre tax, but a married couple with one spouse working at a local small shop not offering 401k gets to save half as much.

Why doesn't the shop have a 401k?

Doesn't the owner want to save for retirement?

They cannot afford it. 401K have administration costs and you have to make it lucrative enough such that both employees participate to pass non discrimination testing, and lots of small businesses are just barely eking out an existence with owners taking little profit other than sweat equity.

Been a while since I looked at safe harbor 401ks, but I think you just have to offer it, not force employees to join.

And admin costs are going down; I think something like $50 +$8/per/mo on Guideline. Not nothing obviously, but can be recouped pretty quickly if you're maxing out even just employee contribution.

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