401k Employer Matching
If you have an employer-sponsored retirement plan, then it helps to learn everything you can about 401k employer matching so that you can get the most out of your retirement fund.
If you don’t know anything at all about retirement accounts and what they can do for you, then you’re in luck because this is the perfect page to start learning.
So keep reading to learn about your retirement account, 401k employer matching, and what you can do to make your future as secure as possible.
401k, a Brief Explanation
Do you need a quick refresher on what a 401k is?
No problem!
The idea behind a 401k is simple, really. A 401k is a type of savings plan put in place to encourage people to put money away for their eventual retirement and is typically offered through a person’s job.
If you have this option as part of your job benefits package, then you decided how much is taken out of your pay every time you receive a check. This money is then invested in things like mutual funds and other such investments that have the potential for growth over time.
As far as taxes on a 401k are concerned, the money is taxed after you take it out, not before you put it in. Likewise, the rules of a 401k say that if you withdraw from the account before you reach the age of 59 1/2, you’ll have to face penalties for doing so.
There are also limits to how much you can put into a 401k account every year, but trends have seen that amount increasing a little every year.
What is 401k Matching?
401k matching is what happens when your employer puts funds in your account that match what you contribute. It’s important to know that this aspect of a 401k is completely voluntary on the part of the employer and not required by law.
If it’s something that you have as part of your company sponsored 401k plan, then it’s something that you should take full advantage of so that you can reach your retirement goals that much sooner.
Like with the funds you contribute, money that comes in under 401k employer matching is made on a pre-tax basis and can be penalized if you withdraw from the account sooner than the rules of the 401k plan allow.
Matching contributions can also be made under a vesting system, which means that you might not have access to the additional funds added by your employer until you’ve been with them for a certain amount of time. Even so, those contributions will add up with time and leave a nice foundation on which you will be able to build a retirement fund in the future.
Knowing that your employer will match whatever you put into your retirement plan is pretty nice, right?
So doesn’t it make sense to do whatever you can to get the most out of your retirement account and make your post-career life a little easier?
Of course it does, and I’ll explain just what you need to do.
Maximizing Your 401k
Staying long enough to get vested and adding enough to take full of advantage of 401k employer matching are just two ways to get the most out of your growing retirement account, but there are other things you can do as well.
Some of which include:
- Looking at the default savings rate provided by your account and supplementing it with additional contributions if possible.
- Diversifying and complementing with a Roth IRA
- If you change employers, rolling your 401k over rather than cashing it out.
- Making sure the investments that your 401k uses are a diverse mix of assets like stocks, mutual funds, and other opportunities.
By following these steps in addition to paying full attention to, and taking advantage of, 401k employer matching, you can make sure you’re able to get the most out of what you put away and enjoy a much more enjoyable retirement in the future.