Why aren't my 401k contributions consistent?

Think you’d notice if your paycheck was wrong? Check again.

I got in a conversation about payroll mistakes last week. He was quite confident that people always know when their paycheck is wrong. 

I wish that were always true. But after years of working inside dozens of companies’ payroll, I know that most people never catch it. 

Part of the problem is that payroll is private. You may find out when it happens to you, but you have no idea who else is affected or how often mistakes happen. And that doesn’t count all the times no one hears anything at all. 

Payroll is complex, and you don’t know what you don’t know. I see a ton of these kinds of silent errors with 401(k)s. 

🤔 Everyone understands the money-in-money-out aspect of 401(k)s, but do you ever think about when your contributions are deposited? 

🤨 What if the deposit is months late? 

😳 What if there was a major market shift in the gap? 

😬 What if your contribution changes aren’t implemented right away? 

By the time you retire, the difference might not be life-changing, but it’s enough that you’d be pissed if someone stole it from your wallet. 

So how do these mistakes happen?

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1️⃣ Broken data feeds 

Legacy systems don’t have great error reporting. A boring-looking, obscurely-worded notification is sent, but no one knows what they're supposed to do. So they deprioritize it. Or they never read the message at all. 

2️⃣ Funding failures 

The bank bounces the transfer (not necessarily because the money isn't there - 💩 happens). That notification goes to one person. 

The 401k doesn’t get the funds. That notification goes to someone else. 

Everyone thinks someone else is on it.

3️⃣ Manual contribution changes 

You increase your contribution, but a human has to make the change in payroll. It’s a pain, so they batch the requests and only implement them every few pay cycles. The provider may be waiting on your team to put in a request to reallocate to the correct date. 

Your team has no idea that's a thing.

Most people don’t even know that it’s possible to backdate contributions. The ones who do know what a pain it is. And they have other things to do. 

Too often, it never gets done unless someone complains.

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So how do you know if you’re missing out on 401(k) growth? 

🔎 Look for lump sum contributions after a long gap. 

⏱️ Make sure your contribution changes are reflected within two pay cycles.

💰 Learn to tell your contributions apart from the employer match. Employer contributions may not be deposited on the same cadence, but your contributions should go in regularly. 

If your 401(k) contributions are all jacked up on a legacy provider, I highly recommend a more modern solution. Guideline and Betterment are okay, but my favorite is Human Interest. I've never had a complaint about them. Ever.

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