There are two questions you need to ask yourself when it comes to your 401K. 

1. Does your employer offer you a 401K retirement benefit?  

2. Does that 401K include a company match?  

When it comes to retirement, we have so many options available to us. But, if you have an employer who offers a 401K match, you want to make sure you use this benefit.  

A 401K match is a benefit where your employer contributes money to your retirement account in addition to your own contributions. Not all employers who offer a 401K benefit include a match, but if they do, you really should consider contributing to it. If you don’t, you’re missing out on free money that can add a boost to your retirement savings.  

There are two common types of matches an employer will offer. These are a partial match and a dollar-for-dollar match. 

A partial 401K match is when the employer contributes a fraction of what you contribute to your account up to a certain percentage of your total salary.  

For example, they could offer employees a $.50 match up to 6% of the salary.  

Let’s just say you make 40,000 a year and you’re contributing 6% of your salary, $2,400 a year. You’ll get $.50 for every dollar from your employer, in this case $1,200, making the total annual contribution $3,600. 

A dollar-for-dollar 401K match means your employer will match 100% of your contributions up to a certain percentage of your salary.  

For example, if they offer a 3% dollar for dollar match, that means they will pay 100% of what you contribute up to 3% of your salary. If you make $40,000 and you’re contributing 3% which is $1,200, then they will match that dollar for dollar, and contribute an additional $1,200 making the total contributions for the year, $2,400. 

Regardless of what type of match you get, a good rule of thumb is to structure your contribution strategy so you’re at least getting the maximum amount your employer will contribute.  

401K matches are a wonderful benefit offered by employers. It’s important to make sure that you take advantage of what they are offering so you can maximize your retirement savings and meet those long-term financial goals.  

Here are some things you should make sure you do in order to maximize your 401K match benefit:  

1. Use it! If your employer is offering to fund a portion of your retirement account for you, make sure you’re using it. To you, this money is free so if you can afford to contribute to your retirement, don’t miss the opportunity. 

2. Check with your employer to see whether they offer a partial match or a dollar-for-dollar match and plan accordingly. Take account of which match it is and structure your contributions so you can get the entire match. 

3. Start funding as soon as you can. The more time you have to let the fund compound, the better. Keep in mind also that a match is great, but depending on your retirement needs, you may need to contribute more than just what gets you the match to be able to retire on schedule. Do the math, use your retirement calculators and consult a financial planner to make sure you’re saving the proper amount to meet your retirement goals.  

If you want personalized financial guidance and retirement planning assistance, we have Financial Planners available through Triangle Financial Group who will meet with you to discuss your financial goals and help you build a personalized strategy. Click on the link to learn more and set up a free consultation.