Matching a 401(k) can make a big difference in your savings, and it’s important to take advantage.
These games are free, and the amount you get depends on what your employer offers and how much you contribute yourself. Learn how the game works and how you can win.
How the 401(k) match works
Employers can offer various matching schemes. For example, your employer may match 100% of all contributions up to 4% of your annual salary. If that’s the case and your salary is $70,000, the employer will contribute up to $2,800 (as long as you contribute that much). So even though you thought you were only donating $2,800, the total donation is $5,600.
Another employer may match 50% of all contributions up to 6% of your salary.
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Why you should prioritize 401(k) matching.
Finding your 401(k) match each year can help you build your nest egg over time. While it’s important to build an emergency savings fund that can cover your expenses for three to six months, financial advisors will advise that you also prioritize putting at least enough money into your retirement accounts for the same. And, it’s free money.
Everyone’s finances are different, which means the best strategy works for your goals, risk tolerance and time horizon. For one person, it may make sense to contribute enough to a 401(k) to get a match, then fund their savings before contributing more to a retirement savings account. For some, it may make sense to withdraw their 401(k) contributions, receive a match and invest any remaining funds in a taxable brokerage account.
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What you need to know about vesting
While the employer game will help your portfolio grow, there is a catch. Plans often have vesting schedules, which determine when you actually receive your employer’s contributions. Some programs require you to work for three years before you get all your games. Some use a fixed schedule, where you get one employer’s game every two years and every game the following year, for example.
The federal government requires that contributions take place within six years, but that can mean waiting six years until those contributions are actually yours. It’s a way for employers to retain employees, and it’s important to understand your retirement plan in case you need to consider it before leaving a job.
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Don’t leave money on the table
Seeing an unused subscription that’s been delayed on a credit card statement for six months sounds like a waste, which is why some people review their budget carefully to make sure those kinds of mistakes don’t happen.
Not contributing enough to your 401(k) to get the full match, similarly, leaves money on the table.
