Employer match

Explanation

Many employers contribute to your 401(k) or 403(b) when you do. Common formulas include:

• 100% of the first 3% of salary, plus 50% of the next 2% (a common “safe harbor” design; maxes out at 4% of salary)
• 50% of the first 6% (maxes out at 3% of salary)
• Dollar-for-dollar up to 4% or 6%

If you contribute less than the cap, you leave part of the match unclaimed. A 50% match is an instant 50% return on those dollars before any investment growth.

Vesting determines when the match becomes yours. Your own contributions are always 100% vested, but employer money may vest on a cliff schedule (all at once after up to 3 years) or a graded schedule (gradually, fully by 6 years). Leaving before you are vested forfeits the unvested part, which can matter if you are planning a job change or early retirement.

Some details vary by plan: whether the match is calculated per paycheck (which can shortchange you if you hit the annual limit early) or “trued up” at year-end; whether matching contributions can go to the Roth side (allowed since SECURE 2.0, and taxable to you if so); and whether student loan payments can count toward the match. Employer contributions do not count toward your $24,500 employee limit but do count toward the overall annual cap.

In scenarios, you can enter your plan’s match formula, and the app adds the match to your 401(k) each year based on your contribution rate.

Example

You earn $100,000. Your plan matches 100% of the first 3% and 50% of the next 2%.

• You contribute 5%: $5,000
• Match on the first 3%: 100% × $3,000 = $3,000
• Match on the next 2%: 50% × $2,000 = $1,000
• Total match: $4,000, for $9,000 going into the account

If you contributed only 3% ($3,000), the match would be $3,000, leaving $1,000 a year on the table. Over 25 years at 7%, $1,000 a year grows to about $63,249.