RSS Feed

Financial Fitness Blog

Take the match: It's the easiest money you'll ever make

 Permanent link   All Posts

Eric SchwartzIf your employer (or your spouse’s employer) offers a match in your 403(b) or 401k plan, take it. It’s free money.

While matching contributions have been popular in the private sector for years, it is a rather new trend in benefits offered by Wisconsin public schools. More and more districts are now offering a match to incent staff to save for retirement and also to make their employee benefit package more attractive to potential recruits and veteran staff.

How it works

The match will vary from employer to employer. It might be 50 cents to a dollar for every dollar you contribute, up to a set maximum—perhaps 3% to 6% of your salary, or in some cases a dollar limit.

Matching funds usually vest over time—meaning the matched funds aren’t all yours until you’ve completed the vesting period—typically 3 to 5 years. Once you’re fully vested, you can take the entire employer match with you should you part ways. However, if you leave before you’re fully vested, you may get to keep only a portion of the match or maybe none at all. It depends on the employer plan. But, all the money you contributed is still yours.

Take the money

Ironically, this benefit is underutilized and many employees are leaving money on the table.With continued changes to post-employment benefit packages in both the private and public sectors, employees will need to rely more on personal savings to fund retirement. Do it the easy way. Never pass up the opportunity to get free money from a match.

An added bonus: The match effectively increases your income without increasing your tax bill, since you pay no taxes on matching contributions until you withdraw them in retirement.

Surprising statistics

  • $1,336: The average amount of employer match employees missed out on in 2014.
  • $42,855: The average amount of employer match an employee will miss out on over the span of 20 years.
  • $1.4B: The total amount of unclaimed employer matching contributions, according to the survey of over 1 million employees.
  • $24B: The annual amount of lost employer matching contributions due to employees not saving enough.

Source: Financial Engines™

Eric Schwartz, Financial Planning Specialist