Our favorite four-letter word? F-R-E-E. The best type of money is free money, are we right? It’s worth doing some due diligence to find hidden benefits and free $ that could be available to you in the form of benefits from an organization you work for.
Organizations and companies often offer employees free money through a company match in your work retirement plans. Yes, it really is as good as it sounds. Here’s how 401k matching works - you put in money for retirement and they match it, up to a certain amount. For a goal as big as a retirement, that can be a big win.
Make sure you contribute enough to your work retirement fund to get a match, if they offer it. You’ll probably need over a million dollars in retirement savings for a traditional retirement scenario (not exaggerating, but don’t worry, it’s more doable than it sounds), so that match is a huge help! Don’t pass it up.
It’s all about starting to save early (like, now). Even with small amounts.
Why it works
Retirement can be daunting, especially if we’re working hard to find money to pay the bills or have a little fun right now. However, an employer match 401k can be a way to make a small amount go a long way. That said, read carefully to make sure you’re getting the most you can.
Here’s an example. Imagine you make $40k yearly, and your company matches ½ of your 401(k) contribution up to 6% of your yearly salary.
If you put in 6% of your salary (or $2,400) the company would put in 3% (or $1,200). But if you put in less than 6%, you’d still only get ½ matched (even if it’s less than 3%). So, if you put in 4% (or $1,600), the company only puts in $800 – and you miss out on $400 of free money.
More of an infographic person? Us too. Here’s how it shakes out:
- Check with your company to see if they have a retirement match.
Not every company has a retirement plan, and some don’t have a match. Be sure to ask your HR department or look into your benefits plan to find out what you do and don’t have.
- Check for any vesting policies.
Some companies require you to be employed with them for a certain timeframe before you get to keep all of the company match if you leave. Don’t worry, whatever you contribute is still yours no matter how long you stay with a company.
- Get that free money!
If you do have a match, check your current contributions. What are you putting in today? If you aren’t getting the full match, try to increase your contributions until you do. If you can’t get all the way there at once, make a plan to get there over time (increasing contributions 1% every 6 months for example).
A company match on retirement saving can be one of the best investments you can make (it gets you access to free money after all).If you do get that match, check your account a few years from now; you might be surprised by how much progress you’ve been able to make toward retirement, even if you’re saving a small amount