In this article I cover everything I know about Google 401k matching and the retirement investment account details that all employees are offered. If you’re looking to make some investment decisions and need to know about the Google 401k match Google provides in 2023, then this tells all.
One of the best things about being formally employed is that as employees, we can benefit from employer contributions provided by the company to boost our retirement savings.
In this case, the employer contribution will match a certain percentage of the employee contributions.
This unique advantage means we can grow our retirement savings accounts much faster than self-employed individuals who do not have access to matching contributions from an employer.
Such benefits are readily available to all Google employees, and those who make the best of their employer’s matched contributions can set themselves up perfectly for retirement.
However, understanding employee contributions, matched contributions, and how these impact ordinary income taxes is not easy without knowing what a 401K match is.
In this article, we will look at Google 401K matched contributions and how eligible employees can make the best of various benefits, such as receiving Google Stock Units (GSU).
When a large company, such as Google, matches an employee’s contributions and the employee manages their account well, it can almost feel like adding free money to their retirement account.
If you want to learn more about the 401K matching program that Google offers to its employees, you are in the right place. Read on to find out more!
Google 401K Benefits Are Among the Best in the Country!
In the US, it is normal for a company to match at least part of the money an employee contributes towards their 401K plan.
Google, as one of the top employers in the country, is right up there with the best of them when it comes to providing such benefits to its employees.
In 2020, studies by Vanguard showed that at least 71% of companies were willing to match half their employee’s contributions up to 6% of the eligible pay.
Incredibly, 21% of companies provided a dollar-for-dollar match for employee contributions.
Over the past few years, there has also been a steady increase in the average 401(k) matched contributions offered by US companies.
Data from the Bureau of Labor Statistics shows that the average 401(k) match among employers has grown from 3.5% in 2015 to 4.7% in 2020.
Google employees are among the top beneficiaries of 401K matching contributions in the country as their company matches 50% of their contributions and also gives them access to company stock units.
Seven Things Google Employees Need To Know About the “Google 401K Plan”
Every Google employee needs to have a good understanding of how the company’s 401K match program works if they are to benefit fully from it.
While the compensation package offered to one employee will differ from that offered to another, there are a few basic similarities that will apply to everyone employed by Google.
In that regard, here are seven things you need to understand as a starting point to making the best of Google’s 401K company match program:
What Is a Google 401K Match?
Google has been regularly applauded for its great benefits and employee-centric work culture.
This is especially true when looking at the company’s 100% 401K matching contributions up to $3,000.
The offer applies to all its workers, including new employees who can benefit from the very first day of their employment.
Unless you choose to use a different 401K plan, as a new employee at Google, you will be eligible to receive a 401K match of up to 10% of your eligible compensation package.
There is also a secondary provision of matching 50% of whatever the employee contributes up to $19,000.
Google also pledges to contribute the greater part of 100% of employee contributions up to $3,000, or at least 50% of the contributions up to $9,500 annually.
As an employee, you are also allowed to retain 100% of Google’s contribution even if you decide to leave the company at any time.
Google Restricted Stock Units (Google RSU)
Another major benefit of working at Google is that you will have access to the company stock units, called Google Restricted Stock Units (Google RSU).
Before going further, it is important to note that a Google RSU is not the same as regular company stock units but is simply a certificate that entitles you to Alphabet Inc. capital stock.
Google RSUs only become valid after you are vested, which we will discuss a little later.
When you become vested, the Google RSUs in your brokerage account will be 100% yours.
Selling them is one of the options you can explore as long as you have a firm understanding of the tax implications that come with such a move regarding capital gains.
A financial or tax advisor will be able to assist you with everything you may want to know about Google RSUs and what you can do with them.
In particular, you must understand the following:
Leaving the company before you are vested will mean you have to forfeit your Google RSUs
All RSUs offered to Google employees are worth the current price on the day of vesting, meaning if the price drops the day before you are vested, you will receive less value
Even if you acquire the stock at a lower value, you have the option of keeping the stock for as long as you want and waiting for the price to increase
Keeping the Google RSUs for more than a year will mean you become eligible to pay taxes at the long-term capital gains rate (much lower than other tax brackets)
Salaried Employees Are Automatically Enrolled
Most companies do not have automatic enrollment for new employees into a 401K plan.
They require that an employee be over 21 years old and complete at least a year of service before becoming eligible for their 401K matching contributions.
However, Google is more progressive in that regard. New employees are automatically enrolled in its 401K match as soon as they start working for the company.
The match is restricted to 10% of the eligible pay unless the employee contributes a different amount from their income.
The Google RSU Vesting Schedule
When you start working at Google, you do not become immediately vested on your first day of employment. You have to wait at least a year for your vesting date during which time your Google RSUs are worthless.
There is a four-year vesting schedule that you will need to contend with. At your first vesting date, you will receive 25% of your RSUs and a further 25% annually for the remainder of your vesting period until you are fully vested.
Contribution Limits on Your Google 401K
Besides the rules set by Google regarding its 401K match program, there are also IRS regulations to consider. In 2022, the total amount you were allowed to contribute towards your retirement plan was $20,500.
If you want to make any contributions on top of the $20,500 imposed by the IRS contribution limits, there are after-tax contributions allowed by Google.
This After-Tax 401K means you, as a Google employee, can contribute up to $61,000 to your 401K either as a traditional or Roth 401K.
What this means is that after you add the $20,500 allowed by the IRS contribution limit, the 401K match from Google, and the After-Tax 401K, your total contributions cannot exceed $61,000.
Google’s Backdoor Roth IRA
Finally, Google has a Roth IRA option that allows you to use a tax-free strategy to convert any after-tax contributions to your Roth 401K.
The money you convert using this option will grow tax-deferred and can be withdrawn tax-free when you retire. If you are one of Google’s higher-income earners, this is a great option to look into.
How To Maximize Your Google 401K Match
Two Google employees can have the same compensation package and pension plan but one ends up with a much healthier retirement account than the other.
This is because of the decisions you make and how they impact your 401(K) plan.
If you want to make the best of your Google 401K match, consider the following:
You Need an After-tax Strategy
The Google “Backdoor Roth IRA” mentioned above is a great opportunity to make the most of any after-tax contributions you may have.
With the contribution limit for a 401K set at $20,500 in 2022 and after-tax contributions allowing you to go up to $61,000, this leaves you with a lot of money that is eligible for conversion into a Roth IRA.
If you play your cards right, those annual tax-free contributions will add up to a significant lump sum by the time you retire.
You have the option of adding funds from your income directly to your 401K using elective deferral contributions.
However, you will need to know how to calculate the amount you are allowed to contribute according to your compensation and the contribution limit set by the IRS for that calendar year.
You simply divide the contribution limit by your annual income and multiply it by 100. That means for an employee earning $300,000 in 2022 (contribution limit was $20,500) the maximum allowed deferral was 6.83%.
Leverage 401K Matched Contributions
The best 401K strategy involves simply making the best of your 401K match program by leveraging your employer’s contributions.
If the company matches 50% of your contributions, as is the case with Google, this is essentially free money that you cannot afford to pass up.
As a Google Employee, You Need a Plan for Your RSUs
Once your vesting period is complete, you will suddenly find yourself owning a small portion of Google stock units.
What you choose to do with them is crucial to how you will benefit from this great opportunity. There are four things you could consider, namely:
Boost Your Savings Plan
Depending on the price of Google shares the day you complete your vesting, you could be sitting on very valuable stocks. Selling them is always a great option if you have considered the tax implications.
The money you get from the sale can be diverted toward your savings account. If you choose a high-yield savings account, you can guarantee that the money will grow quickly while still being available in case of an emergency.
Got Debt? Pay it Off!
Having a huge debt hanging over your head can be not only stressful but a big strain on your finances because of the interest rates you’re being charged on the loan.
If you sit down and do the math, you may discover that you stand to gain a lot more by selling your stock options to pay off the debt rather than keeping the shares.
Re-invest in Your 401K
If you are in a situation whereby Google will match your contributions dollar for dollar, re-investing the value of your stock units into your 401K will mean you can double their value in an instant.
The sooner you boost your 401K retirement plan the better for you when you retire after many years to find a huge nest egg waiting for you.
Start a College Fund
Paying for your children’s tertiary education is going to be one of the biggest expenses you will have to shoulder.
You cannot afford to wait until your children are about to finish high school to start saving for college. Why not use the proceeds from the sale of your stock to fund college savings accounts for your kids?
Do Not Forget To Pay Taxes on your RSUs!
Just because Google benefits entitle you to receive Google stock options when you are fully invested does not exempt you from paying taxes.
You will need to pay taxes when you become fully vested and Google will assist you by withholding 22% of your vested amount to pay your taxes.
However, keep in mind that this may not be enough to cover your tax liability and the responsibility is on you to speak to a financial advisor regarding how much tax you need to be paying.
Also, if you decide to immediately sell your Google stock, know that you have to pay capital gains tax on the sale. This will be calculated from the difference between the selling price and the original vested price.
How To Create an Effective Savings Plan - Five Important Considerations
All Google employees are in a great position to benefit from the employee-centric 401K matching contributions offered by the tech giant.
However, it is up to you to make the best of this opportunity by having an effective savings plan that will protect you from using up all your money before you have a chance to build a solid retirement account.
In that regard, there are five important considerations that you need to make regarding your savings plans, and these are:
Everyone has unique expenses that they need to cover from month to month. These usually depend on individual circumstances, such as the city you live in, your lifestyle, the size of your family, and extra expenses such as medical bills and debt.
When you are planning how you will save any windfall you get from Google’s 401K matching contributions, you need to make sure that all these expenses are covered so that you do not end up running to your savings for emergency withdrawals.
What are your long-term goals? Do you want to build multiple houses or travel the world? Consider the cost of these goals and factor them into your plans.
Education is becoming increasingly expensive if you want to set up your kids for a good start to their adult lives.
If you have kids in the family, it is only a matter of time before you have to pay thousands for college tuition.
When do you intend to retire? Generally, the earlier you want to retire the more you will have to save each year.
If you are going to retire before the age of 59.5, it might mean you will not be able to access any of these funds for a while.
You need to have a plan of how you are going to live while waiting for your retirement account to mature.
Make the Most of Your Google Benefits and 401K match in 2023!
With the information provided in this article at your disposal, you can set yourself up for a very secure financial future that will allow you to enjoy your retirement to the fullest!