Get Your 401K Match
The end of the year is nearly here and that means New Years Resolutions are coming up! This is a great time to make sure you are taking advantage of all work benefits – including your 401K match if you get one.
If a 401K is available to you at work, you should be making every effort to put money into it. It is your chance to save for retirement and there are several good reasons to do it including the matching money from your company. The typical matching programs will “match” your own contributions up to a certain percentage of your income. Each company is different with how this is applied but the key is to, at the very least, contribute enough to get your free matching money.
Time for an example. Let’s say your annual salary is $50,000 and your company has chosen to match 2% of your salary. They may match your contributions 100%, 50% or some other percentage. In this example, we will say it is a 50% match for your contributions. So, in total the company is willing to add a maximum of $1,000 annually to your 401K. To get to that magic number, you will need to make individual contributions of $2,000. That means for $2,000 in contributions, you receive $3,000 total.
The one caveat here is that there is typically a vesting period for the matching money to be fully available. This is typically tied to a number of years working at a company. For example, a company may require 1 year of service to vest 50% of the matching contributions and 2 years of service to fully vest the money. All contributions you make on your own are always yours. Ask your HR department for details on your vesting schedule to get exact details.
Of course, you can contribute more money to your 401K to receive more amazing benefits like reducing your Federal taxable income for the year. The limit for 2017 is set at $18,000 for your contributions. The are additional rules that allow for catch-up contributions of up to $6,000 if you are over the age of 50 as well. Obviously how much you can contribute is up to you but I highly recommend at least getting your matching amount. Why throw away what is essentially free money?