What a 401(k) Match Is

A 401(k) is a retirement account offered through your employer. You contribute a percentage of your salary, it gets invested, and it grows tax deferred until retirement.

The match is something extra.

Many employers will match your contributions up to a certain percentage of your salary. A common example: your employer matches 100% of your contributions up to 3% of your salary. If you earn $50,000 and contribute 3% ($1,500), your employer puts in another $1,500.

That’s a 100% instant return on $1,500 before the market does anything at all.
I didn’t claim my full employer match for the first two years at my job because I didn’t understand what it was. I thought I was saving money by contributing less. I was leaving money on the table. My HR person explained it in about 90 seconds. I felt like an idiot. Don’t be me.

No savings account, no index fund, no investment of any kind can guarantee a 100% return on day one. The match is the single best return available to most working Americans and a significant number of them don’t claim it.

How Much You Are Leaving Behind

Say you earn $60,000 and your employer matches 100% up to 3%.

If you contribute 3%, that’s $1,800 from you and $1,800 from your employer. $3,600 a year invested in your retirement account.

If you contribute nothing, you get nothing from your employer. You also miss out on the compound growth on that missed match.

Over ten years, missing a $1,800 annual employer match — assuming 7% average growth — costs you roughly $25,000 in lost retirement savings. Not from poor investing decisions. Just from not adjusting one number in your HR system.

Most people who miss their match don’t know they’re missing it. The default contribution rate when you join a company is often set below the match threshold. You have to opt up.

Check your benefits portal or ask your HR department two questions: what is the match, and what contribution rate do I need to hit to get all of it? (DOL 401(k) plan finder)

How to Claim It

Log into your company’s benefits portal and find your 401(k) contribution rate.

Increase it to at least the match threshold. If your employer matches up to 3%, contribute at least 3%. If they match up to 5%, contribute at least 5%. Anything less and you are leaving free money behind.

One thing to check: vesting schedules. Some employers require you to stay with the company for a certain number of years before their match money is fully yours. If you leave before you’re fully vested, you may forfeit some or all of the employer contributions. Know your vesting schedule before making job decisions.

In your overall priority order the 401(k) match sits near the top: