Make Most of Employer 401(k)

How to Make the Most of Your Employer Match 401(k)


No matter your age, you’ve likely thought about retirement – and saving for said retirement – at least a few times. And, if you have a 401(k), you’re actively planning for it. 

One of the biggest perks of working full-time for an employer can be its 401(k) benefits, and matching policies as an added incentive. But many employers don’t take full advantage of their employer’s matching contributions. So how does that work, exactly, and how can you make the most of it to boost up your retirement savings throughout your working years? Read on to find out. 

What is an Employer Matched 401(k)?

Employer 401(k) matching means that your employer contributes a certain percentage amount to your retirement savings plan based on the amount of your annual contribution. This matching can occur in several ways, but mainly through a percentage or a dollar-for-dollar match based on how much you choose to contribute annually. 

Employer 401(k) matching does come with constrictions and limits, including capping a dollar amount. For example, an employer may elect to match only the first $5,000 of your employee contributions each year. 

How Does it Work?

Let’s say your employer has a 401(k) plan in place where they agree to match up to 5% of your salary. If you earn $1,000 a week, your employer would match your contributions up to $50 a week (if you choose to contribute that much). This doubles your $50 a week savings to $100 a week, which goes right into your 401(k).

As Clever Girl Finance explains, while this doesn’t sound like much, you’ll see earnings grow faster than anticipated through compounding interest: $100 a week is $5,200 a year, and $52,000 over ten years – before interest. If you didn’t participate in that employer matching, you’d only have about $26,000 saved over ten years. With investments and compounding interest, that extra $26,000 could end up being a key differentiating factor between being able to retire or not. 

Limits and Restrictions to Be Aware Of

Keep in mind that the most you can contribute to your 401(k) plan is $19,500 per year. However, if you’re 50 or older, that contribution limit goes up by $6,500, enabling you to make a “catch-up contribution” in that amount. This means your individual limit goes up to $26,000, annually. Additionally, the total of both employee and employer 401(k) contributions combined cannot exceed $56,000 per year (or $62,000 for those 50 or older).

It’s also worth noting that companies often impose a vesting schedule, which means they can control when you get access to those employer-matched funds. So, if you leave the company, you could be forfeiting all of those contributions. It’s best to talk with your employer about their 401(k) vesting schedule to ensure your savings are truly on track.

Maximize Employer Matching 

To maximize your employer-matched 401(k) contributions, you’ll need to balance a fine line between saving enough to get the full employer match, but enursing you don’t hit your $19,500 cap too early in the year at the risk of missing out on company matches throughout the year. 

To calculate how much you should be contributing, apply your company’s match percentage to your gross income for each pay period. Using the example from earlier, this would be 5% (the employer match) multiplied by your $1,000 a week income to get the maximum contribution (ie: $50 per week). 

If math isn’t your thing, CalcXML put together a helpful calculator to help you determine the ideal contributions you should make annually to ensure you’re maximizing the matching contributions available to you. Once you’ve found your magic number, set up an automatic contribution to go toward your 401(k) from each paycheck to ensure you stay on track. 


The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, we advise you to consult with a licensed advisor.

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