Which 401(k) contribution amount should I select?
My employer matches 100% for up to 3% and the 50% up to 5%. Is it best to limit my contribution to 3% for the 100% match or should I consider the full 5%?
If you can contribute enough to your 401(k) to receive the full employer match, most definitely "Go For It." If you have extra cash flow and would like to invest more for your future, you can direct any additional savings to a Roth IRA. I don't know the full details of your situation, such as age, income, tax situation, cash reserves, retirement savings, other accumulation goals, but you can certainly take advantage of tax-deferred and tax-free growth. Good luck to you!
This is a great question. In general, it is never too early (or too late) to start saving for retirement and a 401(k) plan is a great way to do it in a tax advantaged manner. Contributions to a 401(k) are made with 'pre-income tax dollars' and the account grows tax deferred until you withdraw from it at retirement. At that time, you will pay your then applicable income tax rate on your withdrawal.
So, from a retirement planning perspective, if your cash flow situation allows for it, then you should contribute as much as posssible to your 401(k) (for 2017 you can contribute upto $18,000 pre-tax), irrespective of what percentage of your contribution your employer matches.
If you cash flow situation does not allow for maximum contributions, then you should strive to at least contribute as much as your employer matches or else you will be turning away free money.
Taking the example you have provided (i.e. 100% upto 3% and then 50% for upto 5%), both the matches result in an instantaneous return on your contributions (Because of the tax advantage and the matching). While, one is better than the other per se, that difference will be reduced if you contribute more and the money compounds over a long time. Besides, while what return you earn is important, HOW MUCH you save is more important. For example, I could get a 10X return on $100, but that still comes to $1000, on the other hand a 10% return on $100,000 leaves me with $110,000. So, bottom line is to contribute as much as possible.
Beyond this, it depends on your specific case (Salary level, cash flow, terms of your 401(k), etc.). For example, you may be able to contribute to an Individual IRA as well as a 401(k) so that you can take advantage of the higher matching % and still contribute more to suit your cash flow.
Your answer should depend on how much you need to save to reach your retirement goals, not on what your employer match is. Use a retirement calculator or work with an advisor that can help you sort through all the variables.
Second answer is, never pass up free money! A 50% match is still very generous, take advantage of it if you can. And congrats on your savings.
Your contribution should have very little to do with the company match. You are saving for your retirement and should contribute as much as you can up to the limit. If you want your retirement to be limited, then consider the lower amounts.