Lendtable Review: Cash Advance For 401(k) And ESPP Matching

Maxing out your 401(k) or Employee Stock Purchase Plan (ESPP) contributions to get the full match means having less disposable income.

In some cases, it can put you short so that there isn’t enough money left over at the end of the month to live on. But not taking advantage of the full match also means leaving free money on the table.

For this reason, some employees simply can’t afford to take advantage of their company’s full 401(k) or ESPP match. But a cash advance from Lendtable may be a practical solution for anyone who finds themselves in this position. 

Keep reading to learn more about how Lendtable works and to decide if it could be a smart way to maximize your employer's 401(k) contribution.

Who Is Lendtable?

Lendtable is a fintech that lends money to employees so they can get their company’s retirement plan match. The company is based in San Francisco and was founded in March 2020. The founders are Mitchell Jones and Sheridan Clayborne. Lendtable has raised $6 million through seed rounds.

Related: How To Set Up Your 401(k) On Your First Day Of Work

What Do They Offer?

Lendtable allows employees to max out the match on their 401(k) or ESPP. This is done by providing a cash advance to cover the shortage needed to reach the match.

What Is A 401(k) Match?

A 401(k) match is free money from your employer (assuming it is offered). It is made available as part of your 401(k) plan. Not all employers offer a 401(k) and any match varies by employer. The average match is 3.5%. Some companies match up to 6% or more. It's also important to note that many companies match 50 cents on the dollar, but some match dollar for dollar.

Let's say you make $50,000 per year and fund your 401(k) at 6% of your salary, you’ll have $3,000 in your 401(k) in one year. If your employer provides a dollar for dollar match up to 6%, you’ll get an extra $3,000. Or if your employer's match is 50 cents on the dollar (with the same 6% maximum), you'll receive a $1,500 matching contribution. In either case, the match doesn't count towards your employee contribution, but it does count to your overall 401(k) annual contribution limit.

Note that you may need to be at the job for some time before matching kicks in. It also could take a few years for you to be 100% vested in your company's 401(k). If this is the case, you'll lose some or all of your employer's contributions if you leave your job before you reach the "fully vested" status.

You can set the amount of money to contribute to your 401(k). Returning to our example above, if you can only afford to contribute 4% of your salary, $2,000 of your money will go into your 401(k) and you'll receive a $2,000 match. In this case, you aren’t getting the full 6% match from your employer. That’s where Lendtable comes in.

Related: 5 Tips To Better Manage Your 401(k) To Invest And Build Wealth

How Does Lendtable Work?

Money that goes into a 401(k) is payroll deducted. That means it is pre-tax money, which is a requirement of 401(k)s. Lendtable can’t contribute to your 401(k) directly. Contributions must come directly from your paycheck. So then, how is Lendtable able to fill the match shortage?

Lendtable provides employees with a cash advance that amounts to their match shortage between what they are contributing and what it would take to fully take advantage of an employer match. These advances are paid out in monthly installments.

In the above example, the employee needs to contribute $3,000 per year to earn the full match. However, they're $1,000 short. To fill the match shortage, the employee increases their 401(k) contribution from 4% ($2,000) to 6% ($3,000). And Lendtable lends the extra $1,000, spread out in 12 equal monthly payments throughout the year (~$83.33/month). 

The loan is paid back once your employer's match vests along with a one-time profit split of the match profit. For 401(k)s, Lendtable says that the profit-share percentage it takes is 10% to 20%. But for ESPPs, it keeps 30% to 40% of the profit.

Are There Any Fees?

Yes — as mentioned above Lendtable's profit split for 401(k)s ranges from 10-20%. The exact percentage is dependent on your 401(k) plan, salary, state of residence, and some other personal information. For ESPPs, Lendtable takes 30% to 40% of match profits.

As soon as your company's match vests, you'll need to make an in-service withdrawal to pay Lendtable back their loan plus their profit-share. Note that if you're not age 59½ or older, you'll have to pay a 10% early withdrawal penalty. Lendtable says that the first 10% of their fee goes towards covering the early withdrawal penalty.

Related: How To Pull Your Money Out Of An IRA Or 401(k) Early And Penalty-Free 

In cases where in-service withdrawals aren't allowed by a company, Lendtable will allow you to wait to pay them back until you leave your employer. But you'll have to pay them a bigger share of your match for each additional year you push back repayment.

Unfortunately, Lendtable's FAQ page doesn't give any more concrete details about how these additional shares are calculated. If you won't be able to make an in-service withdrawal to pay back Lendtable, we recommend talking to one of their representatives over the phone to get clear answers about how much your cash advance will cost you over the long haul.

Lendtable Cost Example

Let's consider what you might pay if you borrowed $1,000 from Lendtable to receive a $1,000 match from your company for a total contribution of $2,000. If your profit split with Lendtable is 20%, you'll have to pay them back their $1,000 plus 20% of the $1,000 match ($200).

Your total cost so far is $1,200. Subtract $1,200 from $2,000 and you'll find that you're still profiting $800 from using Lendtable. Sounds like a pretty great deal on the surface, right? But there's more to consider.

For example, if you're not at least age 59½, you'll have to make an early withdrawal from your 401(k) to pay Lendtable back. While you won't have to pay extra fees for this (the 10% early withdrawal penalty is included in Lendtable's one-time fee), you'll still have to pay taxes on the distribution. Generally, the IRS requires an automatic tax withholding of 20% on 401(k) early withdrawals - but the end amount of taxes will be all based on your tax bracket.

Lendtable's FAQ doesn't say much about these tax costs. It simply says: "As for the taxes, we account for those when we give you your cash advance!"  But, for sake of example, if your employer did automatically withhold 20%, Uncle Sam would get $200. Add that to the $1,200 you owe Lendtable and your total cost is now $1,400. 

Your overall profit would be $600, though, which still isn't shabby - but is it better than not using Lendtable and just budgeting? That $600 profit would only be $50 in extra contributions per month to your 401k to end up in the same financial situation without worrying about loans, profit sharing, and more. Then, if you actually contributed $60 per month, you'd actually be ahead of where you would be with Lendtable.

Even if there were no taxes involved, so you profit $800, that's only $66 per month in extra 401k contributions. Again, we don't know if it's worth it, so carefully consider it.

But there's still more to consider. What if you were to leave your job before your company's match vests? In this case, you'd still have a loan to pay back, but you wouldn't have any match to show for it. Ouch.

It's unclear how Lendtable handles these types of situations. Would they only expect you to pay back what you borrowed? Or would there still be an additional fee of some sort? This isn't discussed anywhere in their FAQs. Even if they only expect you to pay back what you borrowed, you'll still have to pay the IRS early withdrawal penalty and tax costs out of pocket (and the higher cost of tax preparation as well).

How Do I Open An Account?

You can visit the Lendtable website to open an account. Anyone with a 401(k) company match is eligible to use the service regardless of how near or far away they may be from retirement. And Lendtable does not perform credit checks.

Is My Money Safe?

Yes - you are only taking out a loan. Lendtable does not interact with your 401(k) and no money is on deposit with Lendtable.

Is It Worth It?

Honestly, we don't think so. Beyond being confusing, we see very use cases where this service makes sense versus simply budgeting to up your 401k contribution.

Thankfully, the Lendtable profit-share fee is one-time rather than an ongoing interest rate. But a 10%-40% fee (before tax costs) is still pretty hefty. You could still come out ahead, though, especially if you're fully vested in your employer's plan. 

But if you aren't 100% vested and you're not age 59½ or older, it's probably not worth the risk of having to incur early withdrawal penalties to pay Lendtable back just to get a match that you may not even be able to keep.

Lendtable is looking to help average American's who can't make the full matching contribution - but I think most of the people would be better served by budgeting and finding the extra $50-80 per paycheck to put into their 401k rather than using the loan with a profit-sharing fee. If we're really talking about average Americans as well, realize this would also entail more tax preparation costs and fees annually as well - since non-qualified retirement plan distributions are excluded from many free tax prep options.

And if we're looking at Silicon Valley folks who are trying to take advantage of lucrative matches, the same rules apply. While the dollar amount may be bigger, there are probably better ways to go about it that can maximize the benefits over the long run.

Within a 1 year time frame, that small fee to Lendtable may not mean much. But every $1,000 you pull out of your 401k is worth $10,000 over 30 years... that starts really adding up over time.

There are simply better (i.e. less complex, cheaper) ways to maximize your employer match without taking out a loan. Building multiple income streams and/or decreasing expenses are still the most tried-and-true ways to make room in a budget for higher retirement contributions. 

Related: 15 Ways To Save An Extra $500 Per Month

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