Matching contributions — Beef up your savings faster with help from your employer

Many employers offer matching contributions to encourage us to save for retirement. Are you taking advantage of this benefit?

Strike a match

Some employers will match the contributions you make dollar-for-dollar, up to a certain percentage of your pay. Others may match a portion of each dollar you put in, say, 50%. Regardless, it’s “free money.” Having your employer contribute right along with you makes your retirement account grow faster than if you were the only one putting money in.

Max out your match

Let’s say you work for an employer who matches your 401(k) contributions dollar-for-dollar up to 6% of your $45,000 salary. If you save the full 6%, the company will contribute $2,700 right alongside the $2,700 you’re putting away for your retirement. If you save less than the full 6%, you’re leaving some of that “free money” on the table.

Go for the vest

Vesting is a way for employers to encourage you to stay with them. Basically, it means that while you have full ownership of your own contributions, you’ll only gain access to your employer’s contributions over a designated period of time.

Vesting can happen in two ways: A graduated vesting schedule gives you increased ownership of the employer funds over time until you’re fully vested. A cliff-vesting schedule withholds ownership until you’ve completed a certain number of years of service, at which point you become 100% vested. Once your employer’s contributions are fully vested, they’re yours and you can take them with you if you leave.

Again, max out your match

At the risk of being repetitive, we’ll say it again. Contribute enough to get your employer’s maximum matching amount. It’s a great way of turbo-charging your retirement savings. And besides, it just doesn’t make sense to walk away from “free money.”