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How to Make the Most of Your Company’s Retirement Plan

There are not many opportunities in life for free money, but that is exactly how you can think of 401(k) matching contributions from your employer. If your company offers a 401(k) match, when you put money into your 401(k) plan, they will too.

Making the most of a company match is one of the best ways to start saving for retirement, and the sooner you start, the better off you will be.
Jania Stout, Senior V.P., Retirement Services, OneDigital


Here are more ways to make the most of a company match and your company’s retirement plan overall:


Tap Into Thousands of ‘Free’ Dollars

According to Vanguard, nearly four in ten U.S. workers turn down “free money” by not contributing enough to their retirement plan to earn the full employer match.

If your employer offers a match, find out how much you need to save towards retirement to get the full amount. There are several ways companies may contribute to your savings and understanding how your employer approaches the match can help you make the most of it.

A common approach is for employers to offer a 50% match up to a 6% contribution rate. This means that if you put 6% of your pay towards retirement, your employer will contribute an additional 3% in matching contributions. In this hypothetical scenario, if you earn $60K a year and your contributions meet or exceed $3,600, your employer would provide an additional $1,800 towards your savings.

If you continue contributing 6% for 20 years (and never earned a raise), you would have $108K in savings. Comparatively, if you only put away 3% of your salary in your retirement, and therefore did not earn the employer match, you would have just $36K in retirement savings. This is not including annualized returns, which also could earn you a lot of additional funding

Find Savings for Long Term Gain

I hear from many employees that they can’t contribute up to the full match due to debt or other financial priorities. I tell these folks that contributing enough to earn the full match should be in their top three priorities so that they aren’t leaving money on the table.

When it comes to your financial wellness, the most important factors are paying down high interest debt, building an emergency savings fund, and contributing enough to earn the full employer match.

If you aren’t contributing enough to earn the full match yet, take the following steps:

  • It’s common to hear people say they have no money left over after they pay their monthly bills. It’s easy to lose track of what you are spending your money on each month. Try taking inventory on exactly where you spend your money each month, so you have a strong idea of what your bills are and how much you spend on discretionary costs, like going out to eat. Then, look for ways to cut back on discretionary spending and put those extra dollars towards your retirement account. You may be surprised that by looking closely at your spending habits you can uncover money that can be used to meet your savings goal.
  • Take advantage of a pay raise. The beginning of the year is when many companies conduct performance reviews and consider pay raises. When you get a pay raise, use it as an opportunity to increase your 401(k) contribution.
  • Increase your 401(k) contribution by 1% each year. If you have trouble finding additional savings in your budget, start slow and increase your contributions over time. A 1% increase means you won’t see a large reduction in your take home pay, but over time you will be closer to earning the full employer match.

You’ve Met Your Match. Now Exceed It.

Another common mistake employees make is that they contribute up to the match and then stop. Contributing up to the match is essential to earn that ‘free’ money, but long-term you should aim to contribute 10 - 15% of your own income to your retirement plan.

Between your increased contributions and receiving the full employer match, you will be well on your way to maximizing your retirement contributions.

Make sure you understand the resources available for your 401(k) plan and take advantage of them. There may be online tools to help you and or you may be able to speak with a financial advisor. Ask your employer how you can make your 401(k) plan best fit your needs!

Take a Coffee Break with Jania Stout here.

Investment advice offered through OneDigital Investment Advisors, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.