Is A 401(k) Match Worth It?
As a benefit for employees, companies will offer a 401(k) match. This means if you decide to contribute money into your 401(k), the company will match your deposit. That means you are getting an instant 100% return on your contribution + future growth. Seems pretty good to me! This is what you need to know about 401(k) matching:
Different Ways To Match
There are multiple ways for companies to match your contributions.
100% up to 4%
This means that if you make $100,000 per year and contribute 4% of your ay to the 401(k) plan, or $4,000, your employer will contribute $4,000 (100% of your contribution) for a total contribution of $8,000 into your 401(k).
50% up to 6%
This means that if you make $100,000 per year and contribute 6% of your pay to the 401(k) plan, or $6,000, your employer will contribute $3,000 (half of your contribution) for a total contribution of $9,000 into your 401(k).
According to studies, the most common type of matching is 50% up to 6%. However, companies may do more or less, so it really differs between every single company.
If I Choose Roth, Is The Match Money Roth Too?
Potentially. If you contribute money to a Roth 401(k), your employer’s matching contributions can be made on either a pre-tax or after-tax basis.
Before 2023, matching contributions to a Roth 401(k) had to be made on a pre-tax basis, meaning they were counted as contributions to a traditional 401(k) plan. But now, as part of the SECURE Act 2.0, employers may allow matching contributions on an after-tax basis as well. This is a great benefit!
401(k) Limits - 2025
Each year, the limits to contribute into a 401(k) usually go up. These are the limits in 2025:
Employee Contributions = $23,500
Employee + Employer Contributions = $70,000
Catch Up Contributions
50-59 & 64+ = $7,500
60-63 = $11,250
Plans are not required to offer the “super catch up”, so be sure to check with your plan administrator
Do I Immediately Get My 401(k) Match?
Some companies will require a “vesting period” which means if you leave the company before a certain time period, you may not be able to keep the match money. You will always be able to keep your contributions, since it is your money.
Some companies may do immediate vesting.
Some companies may do a 3 year vesting where you are 0% vested until year 3, then you are 100% vested.
Some companies may do a 6 year schedule, where you get 20% vested after year 2, 40% after year 3, 60% after year 4 & so on.
You can find all this information by reaching out to your company’s HR Department, the person who manages employee benefits or the plan administrator. You also can look at the Summary Plan Description (SPD), which is a document that provides participants with a clear, understandable summary of their rights, benefits, and responsibilities under the 401(k) plan.
Is The 401(k) Match Worth It?
Yes. If you are offered a match from your company, then most of the time it makes sense to contribute enough to max out the match. This can be seen as “free money” for retirement, because it’s coming from your company’s pocket. The power of the match, over time, can result in a lot of extra money in retirement.
Let’s look at the difference between investing $8,000 per year without a match vs $8,000 per year with a match.
$8,000/year ($667/mo) for 25 years at 8% average rate of return = $585,139
$8,000/year + $8,000/year match ($1,333/mo) for 25 years at 8% average rate of return = $1,169,402
In both examples, the contributed amount is the same, $8,000 per year, but since the second offers a match, this resulted in $584,263 in more! This is the power of the 401(k) match.
Thanks for reading & I hope you found value in this post.
-Kolin
If you are looking to get organized on your finances, read this post: Getting Your Finances Organized As A Newly Married Couple
Disclaimer: The content provided in this blog post is for educational purposes only and should not be considered as financial advice. While every effort has been made to provide accurate and up-to-date information, the content on Money Matters For Two is based on personal research, opinions, and experiences. The financial landscape can change rapidly, and what may be applicable at the time of writing may not necessarily be applicable in the future.
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