In this guide
An employer match is one of the few guaranteed returns in investing. If your employer offers 50 cents for every dollar up to 6% of pay, contributing less than 6% leaves money on the table.
How the match works
Most plans match a percentage of your contribution up to a cap. The exact formula varies. Read the plan summary and confirm the payroll deduction is set high enough to earn the full match.
On a $60,000 salary, a 6% contribution is $3,600 a year. A 50% match adds $1,800, before any market return.
The vesting schedule
Employer contributions may vest over time. A three-year cliff, for example, means you keep the match only after three years of service. Your own contributions are always yours.
What to do after the match
Once you capture the full match, increase your contribution rate with each raise. Keep an emergency fund, pay down high-interest debt and choose an investment mix that matches your time horizon.
The match is the starting point, not the finish line.
Common questions
Should I contribute to my 401(k) or pay off debt?
Capture the full employer match first if you can. Then compare the interest rate on the debt with the expected return on the investment.
What happens to the match if I leave my job?
It depends on the vesting schedule. Check your plan documents before you assume the employer money is yours.
Sources
This guide draws on public data, accreditor directories and our own interviews.
- Internal Revenue Service, 401(k) plan overview
- U.S. Department of Labor, retirement plan participant guides
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About the author
David Krug
David leads the RaveReviews editorial team, turning research into clear comparisons and useful guides. He oversees content strategy, testing standards and the final read on every ranking.
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