How Do I Maximize My Employer 401(k) Match?

Many employees are not taking full advantage of their employer’s matching contributions. If, for example, your contribution percentage is so high that you obtain the $18,000 (year 2017) limit or $24,000 (year 2017) limit for those 50 years or older in the first few months of the year then you have probably maximized your contribution but minimized your employer’s matching contribution.

 

 

If you’re wondering “how much do I need to put in my 401k?” you need to consider employer matching. If your employer matches your 401k contributions, they are basically helping you reach your retirement goals faster. Taking advantages of this benefit of your employment lets you save more for your retirement without cutting into your spending.

There are a few ways you can take advantage of employer matching:

  • Understand the maximum percent of salary provision. Many employers only match contributions up to a certain percent of your salary. If you contribute more than this percent, the contributions above this percent will not be matched. By maxing out your employer match, you make sure that every dollar you contribute to your retirement gets the added boost from your workplace. It may not make sense for you to contribute more, especially since it means less money out of your pocket to pay for living expenses now. The maximum percent of salary provision varies widely, so you will need to read about your benefits or ask an HR professional to determine the percent in your case.
  • Evaluate how much your employer will contribute. Some 401k match agreements match your contributions 100% while others match a different amount, such as 50%. If your benefits see your contributions matched 100%, it means that for every dollar you set aside for retirement, your employer will match that with another dollar, up to the limit. Understanding how much is being matched lets you understand how much you are setting aside for your after-employment years.
  • Determine how much you need in your 401k to retire? Use our free calculator at Money Help Center to determine how much you need to save for retirement and how much you need to set aside each month. Knowing how much you need to save overall lets you determine how much you need to invest now and how much your employer needs to match to help you reach your goals.
  • Examine the fine print. Some companies have vesting, which means you must stay with your organization for a specific number of years to enjoy full 401k matching. If you leave early, you may not be able to take all your matched contributions with you. In addition to vesting, you may want to read about any other provisions in your work agreement that could impact your retirement plans.
  • Get tax advice. Your retirement contributions can impact your taxes. You may wish to consult with your tax professional to determine how your retirement savings and employer match impact the taxes you pay now. That can be a key part of financial planning now and for the future.

Use the free, unbiased calculators at Money Help Center to help you plan for retirement. Figure out how much you need to save and what you need to put aside each month to enjoy your golden years.