401(k) and Employer Matching

A 401(k) is a retirement savings account offered through many employers. Its most important feature is the employer match, which is additional money your company contributes to your account.

Many employers match employee contributions up to a certain percentage of salary, usually 3–6%.

If you contribute to your 401(k), your employer contributes as well (up to the match limit). For example, if you earn $50,000 per year and your employer matches 3%, your employer contributes a total of $1,500 to your plan.

An employer match instantly doubles the portion of your contribution matched by your employer. Failing to contribute enough to receive the full match means turning down part of your compensation.

You always own the money you contribute, but employer contributions may be subject to a vesting schedule, often requiring three to five years of service before you fully own the matched funds.

As a smart first step, learn your employer’s match policy and contribute at least enough to receive the full match as soon as possible.