How to Double Your Money with a Common Employer Fringe Benefit
Max out all the essentially free money your employer is offering you!
Imagine an investment that guarantees to double your contribution the moment you make it. That’s exactly what a 401(k) match does. And yet, millions leave it on the table. Don’t be one of them.
What is a 401(k) match?
Many employers will match (up to a certain amount) the money you take out of your paycheck and put into a retirement account.
Here’s how powerful this is:
Let’s say you make $100,000 a year and contribute just 3% of your salary—that’s $3,000. If your employer matches 100% up to 3%, they’ll put in another $3,000. That’s an instant 100% return. No guesswork. No waiting. No stock picking. Just free money—automatically deposited into your future.
The Nitty-Gritty:
It’s likely your employer offers a retirement plan:
401(k), for profit entity
403(b), not for profit entity
Thrift Savings Plan, Federal Government entity
Hopefully, you are at least familiar with these plans to know if you’re already putting money into them. You can invest the funds longer-term on a tax-deferred basis, meaning the funds you contribute are generally exempt from current federal and state income taxes. However, they are taxed on the FICA level i.e. Medicare, Social Security, etc. If you are contributing, generally but not always, your employer will match what you contribute up to a certain level.
How much should you contribute?
A great rule of thumb is to contribute a minimum of what your employer will match.
IF you have the ability to contribute the maximum allowed ($23k and an additional $7,500 if you’re 50+), you’ll be taking the full advantage of the retirement plan benefits and maximizing your chances of a comfortable future.
Most people, especially with higher inflation, don’t have this ability, and we realize that. So the answer is somewhere between the employer match and the maximum contribution allowed.
Ease into it…
Start with at least the minimum to get your employer’s full match. Then, try increasing your contribution by 1% each month until you find the sweet spot that fits your budget.
Need help?
Reach out to your HR or benefits team, or contact your plan provider (like Fidelity, Vanguard, or Schwab). A quick call could lead to thousands more in your future. You’ll be glad you did.
Disclaimer: This newsletter is for informational and educational purposes only and is not intended as financial, investment, tax, or legal advice. Consult a licensed financial advisor or tax professional before making any decisions based on this information.