Does your company have 401k?
Do you know if the company matches contributions?
If so, do you know what the match is?
Or more specifically, what the terms of the match are?
Where I work, the majority of the six folks I talked to did not know what our company match was, or what is required to maximize the match.
And you know what? That’s a shame. Because those folks have been “leaving money on the table” as they say.
Although the way in which 401k terms are spelled out are not always straightforward, the idea is quite simple. And you might be missing out if you have not taken the time to understand exactly how your company’s 401k program works.
401k programs with a match generally work like this:
The company will contribute a certain dollar amount for every dollar you contribute.
For example, the last company I worked at contributed 25 cents for every $1 I contributed, up to a maximum of 1.5% of my gross salary for the entire year.
My current employer contribute $1 for every $1 I contribute, up to a maximum of 4% of my gross salary for the entire year.
And while my current employer’s plan is significantly better (more than twice as good — 4% vs. 1.5%) the point is that in both scenarios, the company is giving away free money. The catch is that in order to take advantage of the free money, you need to know how your company’s program works.
So if you like free money and you aren’t exactly sure how your company’s 401k program works, then I advise you to contact your HR department to find out how you learn more about it.