How to Take Advantage of 401(k) Matching

January 5th, 2024

Let’s be honest, thinking about retirement can feel… distant. It’s easy to put off saving for later, but building a strong nest egg shouldn’t be something you leave to the very end. One of the easiest and most powerful ways to start building that nest egg is through your company’s 401(k) plan. And a huge part of that is understanding 401(k) matching – and making sure you're getting the full benefit!

What is 401(k) Matching?

A 401(k) match is essentially free money your employer gives you for contributing to your retirement savings. Most companies offer a matching program, and it works like this:

You contribute: You decide how much of your paycheck to contribute to your 401(k) account.
Your employer matches: Your employer then adds a percentage of your contribution to your account. For example, a common match is 50% on the first 6% of your salary. This means if you contribute 6% of your salary, your employer will add an additional 3% to your account.
It's free money! Seriously, this is a fantastic perk and one of the best ways to accelerate your retirement savings.

Example:

Let's say your company offers a 50% match on the first 6% of your salary. You earn $60,000 per year and contribute 6% ($ 3,600) to your 401(k). Your employer will then contribute an additional $1,800 (50% of$ 3,600). Suddenly, you have $5,400 in your retirement account!

Why Should You Contribute Enough to Get the Full Match?

This is the big one! Here’s why it’s so important:

It’s Exponential Growth: That 50% match dramatically increases your retirement savings. Even a small increase in your contributions early on can make a massive difference over the long term due to the power of compounding.
It's a No-Brainer: Think of it as getting paid to save. It’s a win-win for both you and your employer.
It Encourages Long-Term Savings: Getting the match can create a habit of saving, making it easier to continue contributing in the future.

Important Considerations:

Check Your Plan Documents: Understand the specifics of your company’s 401(k) plan, including the matching percentage, vesting schedule, and any other rules.
Vesting: You don't automatically own the company match. You "vest" in the match over time. This means you need to continue contributing to the 401(k) to keep the match. Typically, the vesting schedule is around 3-5 years.
Start Now! The sooner you start contributing, the more time your money has to grow.

Don't miss out on this incredible opportunity to boost your retirement savings. Make sure you’re contributing enough to receive the full 401(k) match – it’s a gift that keeps on giving!