- Employer match is when your employer contributes money to your retirement savings plan based on your own contributions.
- It's like getting free money towards your retirement savings.
- Taking advantage of employer match is an excellent way to boost your retirement savings and make the most of your benefits.
How does employer match work?
Imagine you're working for an amazing company that offers an employer match for its employees. Let's say the employer match is 50% up to a certain percentage of your salary. Here's how it works:
For every dollar you contribute from your paycheck towards your retirement savings plan, your employer matches it with 50 cents, up to a specific percentage of your salary. So, if you contribute $100, your employer adds $50 to your retirement account, making it a total contribution of $150. That's like getting free money towards your future!
Real world example of employer match
Let's say you're earning $40,000 per year, and your company offers a 100% employer match on the first 3% of your salary. If you contribute 3% of your salary, which is $1,200 per year ($100 per month), your employer will also contribute an additional $1,200 per year. So, in total, you'll have $2,400 going into your retirement savings each year, but you only had to contribute $1,200 from your own paycheck. That's double the impact!
By taking advantage of your employer's match, you're not only building your retirement nest egg faster but also maximizing the benefits offered by your company. It's a win-win situation.
The bottom line
Employer match is an incredible benefit that allows you to boost your retirement savings by receiving free money from your employer. By contributing to your retirement savings plan, such as a 401(k), and taking advantage of the employer match, you're making the most of your benefits and setting yourself up for a financially secure future. Remember, not all companies offer an employer match, so if you're lucky enough to have this benefit, make sure to take full advantage of it and watch your retirement savings grow.