Understanding the Adidas 401k Plan
What is the Adidas 401k Plan?
IntelliVest Wealth Management is not affiliated with, endorsed by, or sponsored by adidas or adidas America, Inc., or by Charles Schwab or any of its affiliates. "adidas" and "Charles Schwab" are registered trademarks of their respective owners. This article is provided for educational purposes only and is not a solicitation, an offer, or individualized investment advice. Plan provisions change; always confirm details against your official plan documents.
The Adidas 401k Plan is a retirement plan offered by the company to help employees begin saving for retirement. As you contribute to the plan, your money is typically invested in a variety of stocks and bonds to help grow your money over time. 401k Plans in general can be a great tool to help you reach your retirement goals.
The Adidas 401k Match: Why 4% Isn’t Enough
According to the Adidas Form 5500, if you contribute 4% of your pay to your adidas 401k, you probably believe you're capturing the full employer match. You're not. You're leaving about 1% of your salary on the table every year if Adidas chooses to fund a discretionary contribution.
The Adidas plan matches in two layers, and most employees only know about the first one.
Layer one — the safe harbor match. Adidas contributes 100% of the first 4% of eligible compensation you defer. Dollar for dollar. Contribute 4%, get 4%.
Layer two — the discretionary match. Above 4%, Adidas has historically added 50% of your contributions from 4% up to 6% of compensation. Fifty cents on the dollar, and it stops at 6%.
Here's what that means in practice:
If you contribute 4% your guaranteed match is 4% making your total match 4%
If you contribute 5%, your guaranteed match is 4%. If Adidas funds a discretionary contribution, your total match can be up to 4.5%
If you contribute 6%, your guaranteed match is 4%. If Adidas funds a discretionary contribution, your total match can be up to 5%
If you contribute 10%, your guaranteed match is 4%. If Adidas funds a discretionary contribution, your total match can be up to 5%
6% is the number that matters. Below it, you're turning down employer money. Above it, the match stops — additional contributions are still worth making for other reasons, but they earn no further match.
One honest caveat, because we'd rather you hear it from us: those dollars from 4% to 6% are matched at 50%, not 100%.
The discretionary layer is approved by the company each year and is not guaranteed. The safe harbor match is.
A Worked Example: What Moving From 4% to 6% is Actually Worth
Meet Sarah. Sarah works at Adidas and earns $52,000 per year. She's contributing 4%, which she assumed was the right number.
Moving from 4% to 6% costs Sarah about $40 per paycheck (biweekly, before accounting for the tax deduction, which makes the real cost lower). In exchange, Adidas adds about $20 per paycheck it wasn't adding before.
Now let it run. Assuming a 7% average annual return over 20 years:
Contributing 4%: about $170,500
Contributing 6%: about $234,500
Difference: roughly $64,000
Sixty-four thousand dollars, from $40 a paycheck.
And here's the number most Adidas employees have never calculated. At a 6% deferral, between her own contribution and the match, 11% of Sarah's pay is going into her retirement account every year — on a $52,000 salary. That is a genuinely strong retirement plan, and most participants have no idea it's available to them.
*This is a hypothetical illustration and does not represent the performance of any actual investment. It assumes a constant 7% annual return and level contributions with no salary increases. Actual results will vary. The projection assumes the discretionary match continues at its historical level; it is not guaranteed.
Vesting: The Part Worth Checking Before You Quit
Not all of the money in your Adidas 401k is equally yours.
Your own contributions are always 100% yours. Every dollar you defer, plus everything it earns, travels with you no matter when or why you leave.
The company's discretionary contributions vest over time. You earn 20% ownership for each year of service, reaching 100% after five years. Leave before then and you forfeit the unvested portion.
If you become disabled or die, everything vests immediately — regardless of years of service.
Here's why this matters more than it sounds. If Adidas has funded discretionary contributions during your years of service, that portion of your balance is subject to the schedule above — and after a few years it can add up. At four years of service you're 80% vested in it. Reaching your fifth anniversary moves you to 100%.
Depending on your balance, that final step can be worth well over a thousand dollars — and it turns on a service anniversary, not on when you decide to leave. If you're considering a move, check your years of credited service and your vested percentage first. We have seen people delay a departure by a few weeks and keep money they would otherwise have walked away from.
Who Recordkeeps Your Plan, and How to Reach Your Account
Your Adidas 401k is recordkept by Charles Schwab. You can access your account through Schwab's workplace retirement site — the exact address appears on your statement and in your enrollment materials. If you're not sure, go to schwab.com directly rather than clicking through from a search result.
Once you're in, check three things: your deferral rate (is it 4% or 6%?), your vested balance on the discretionary contributions, and your investment allocation. Most people set these once at hire and never look again.
Leaving Adidas: Your Four Options
1. Leave it in the Adidas plan. Often underrated. Large employer plans frequently have institutional share classes with lower expense ratios than you can access retail. If the lineup is solid and the fees are low, staying can possibly be a good decision.
2. Roll it into your new employer's plan. This can help consolidate your accounts. Make sure to compare the new plan's lineup and fees against Adidas's before moving.
3. Roll it into an IRA. Opens a far wider investment universe and allows coordinated management alongside your other assets.
4. Cash it out. This will cause ordinary income tax plus, if you're under 59½, a 10% penalty. A $50,000 balance can shrink well below $35,000 before it reaches your bank account, and you permanently lose decades of tax-deferred growth.
There's no universally correct answer. It depends on your age, bracket, other accounts, and what you're trying to accomplish. If you'd like a second opinion on your situation, our consultations are complimentary.
Traditional or Roth?
Many 401(k) plans let you choose between pre-tax (traditional) and Roth contributions. Traditional lowers your taxable income today; Roth means qualified withdrawals in retirement come out tax-free. The question is whether your tax rate is higher now or later — Roth often wins early in a career or in a lower bracket, traditional in peak earning years.
When you next log in to your account, check whether a Roth election is available to you. If it is, and you've never made an active choice, you're defaulted into pre-tax — which may or may not be right for you.
What is a 401k Match?
Most 401k plans offer a match to contributions added to the 401k account. This means that your employer will contribute a certain amount towards your 401k. In some ways you can look at it as free money.
Every 401k plan match is different. Some plans match up to 3% while others match even higher. If you need help understanding the match program at Adidas or your company feel free to contact us as we provide free consultations.
Please keep in mind, most matches from an employer are subject to a vesting schedule.
When can I pull out of my Adidas 401k Plan?
401k Investments are available after 59 and a half years old. This means you can begin taking from this account to help supplement your retirement years. Depending on if you contributed to a Traditional 401k or a Roth 401k would determine the potential tax implications.
It is theoretically possible to pull from your 401k earlier, however it comes with heavy penalties and tax consequences.
How should I invest my Adidas 401k?
You should typically invest your 401k in a manner that is most appropriate with your comfort level with the market while also making sure you are investing towards your goals. Everyone’s 401k plan is different in how they invest.
Most of the time, if you do not personally choose the investments inside of your plan, you are auto enrolled into a Target Date Fund. While Target Date Funds have gotten many people to retirement, they sometimes may not be the most optimized approach. Due to the construction of a target date fund, it may not be structured to help you achieve your goals.
Many firms, like IntelliVest Wealth Management, help clients everyday try to optimize their 401ks and other retirement assets.
Frequently Asked Questions
Is the Adidas 401k match vested immediately? (Your own contributions always. Company discretionary contributions vest 20% per year, 100% at five years.)
Does Adidas match 401k contributions? (Yes — 100% of the first 4%, guaranteed. Plus an additional discretionary match, historically 50% of contributions between 4% and 6%.)
How much should I contribute to my Adidas 401k to get the full match? (Everyone’s situation is different. If you are wanting to maximize the offering at Adidas contributing 6% will help accomplish this.)
What happens to my Adidas 401k if I quit? (You have many options. You may keep the 401k in the Adidas plan, Roll it into your new employer’s plan, Roll it into an IRA, or cash it out. Cashing out has tax and potential penalty consequences.)
How do I change my Adidas 401k contribution rate? (Through the participant portal and also reaching out to your HR department for help.)
Does the Adidas plan offer a Roth 401k option? (Many plans do, check whether a Roth election appears in your portal.)
Can I take a loan from my Adidas 401k? (Yes, Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to
the lesser of $50,000 or 50% of their vested account balance, subject to certain other
restrictions.) Source: Form 5500
When am I eligible to enroll in the Adidas 401k? (Employees of the Company are eligible to participate in the Plan upon employment, provided they are 21 years of age (excluding union employees, nonresident aliens, international employees, and independent contractors). Full‐time employees receiving employer non‐matching discretionary contributions and temporary employees must also complete 1,000 hours of service in order to participate in the plan.)
Disclosure
IntelliVest Wealth Management is a Registered Investment Advisor Headquartered in Spartanburg South Carolina. This is not a solicitation or financial advice. This article should only be used for educational purposes. Please consult with IntelliVest Wealth Management about your personal financial situation.
