3 Great Reasons to Take Your 401k Employer Match

Employer-Sponsored retirement savings plans, such as a 401(K) or IRA, help you prepare for the future. But are you using yours as effectively as you could? Saving less than you’re allowed or not taking full advantage of a 401k employer match plan at all could leave you unprepared once retirement rolls around. The good news is that you can elect to change the way that you contribute. If you haven’t saved enough so far, there’s still probably time to make up for it. What is a 401k Employer Match? A 401k employer match program is a benefit offered by many companies — like health insurance or vacation time. However, it is not a service, the 401k matching benefit is actual money.  With a 401k matching program, the employer agrees to put in as much money as you do (or a percentage of what you contribute) into your retirement savings — up to a certain amount. So, if you save $3,000 toward retirement, then your employer — depending on their specific policy – might contribute another $3,000.  This is real money that will add up quickly.   Here’s what you’d stand to gain by taking full advantage of your employer’s 401k matching plan: #1: A 401k Employer Match Pays You to Save for Retirement Why take advantage of your employer-sponsored savings plan, including the employer match? A better question would be, “Why not!” An employer match means he is paying you to save money to build a healthy retirement income for later. Once you retire, you’ll still have expenses and still need an income. But if you’re like most retired people, a part-time job won’t pay as much as you earned before. Employer match is like earning a salary now that you’ll be paid for later. #2: A 401k Match Employer Match Program Enables You to Save Twice as Much as You Could Alone You might think that you don’t earn enough to build much savings. That’s a big reason why many people put off saving until later, believing they’ll have a better job in time. But for every dollar that you save in a 401(k) or IRA plan, your employer match could double it, or come close. Every plan is different, so you’ll be governed by you plan’s limitations. But if yours allows an employer match up to 6 percent of your salary, Charles Schwab explains that on a $50,000 salary, you’ll have $6,000 toward retirement instead of $3,000. You’ll also keep more of what you earn, because 401(k) and IRA plans are tax deferred. #3: Raise the Maximum Contribution Limit on Your 401k Employer Match If you contribute on your own, the maximum you can save annually is $18,000 in 2015. If you’re over 50 and use catch-up savings, your limit will be $24,000. Those limits are set in stone, unless you factor in an employer match. Your contribution limit in an employer-sponsored 401(K) plan will raise to $23,000 annually, for a person under 50, if you decide to take advantage of an employer match. And if you’re over 50, it’s even better. Your limit will raise to $56,500, according to Bankrate. Any savings is good, and you’ll certainly need it one day. But even for people who save consistently, there might be another way to make it better. If you’re missing out on an employer match, you’re walking away from extra retirement income that doesn’t come out of your paycheck – it’s funded by your employer. So How Much do You Need for Retirement?  Do You Need the 401k Employer Match? Boldin is committed to helping you make the most of your savings and investment potential, so that you can enjoy the best retirement possible. If you haven’t yet tried out our retirement calculator, that’s the best way to learn where you stand now, where you need to be, and how to get there. You might be surprised by how much retirement costs.  And the knowledge may provide the motivation you need to save as much as possible now.