Glossary
Employer Match
Money your employer adds to your 401(k) when you contribute, typically 50–100% of your contributions up to a salary percentage.
An employer match is compensation your employer pays into your 401(k), triggered by — and proportional to — your own contributions. A typical formula reads “50% of contributions up to 6% of salary”: contribute 6% and the employer adds 3%; contribute 4% and they add 2%; contribute nothing and the money simply doesn’t exist.
That last clause is the point. A match is the only investment with a guaranteed instant return of 50–100%, and declining it is working for less than your offered pay. Whatever a budget must sacrifice, capturing the full match comes first — before extra debt payments, before other savings.
Details that matter in practice: match money is always contributed pre-tax (even against Roth 401(k) contributions); it doesn’t count toward your personal IRS contribution limit; and it may vest over time — leave the company before the vesting schedule completes and part of the match is forfeited. Check your plan’s vesting terms before timing a job change.
Over a career, the match compounds like everything else: a $2,800 annual match growing with raises at 7% returns accumulates to several hundred thousand dollars by retirement. See the line item for yourself in the 401(k) calculator.
Related calculators
- 401(k) CalculatorProject your 401(k) balance at retirement with employer matching and annual raises — and see exactly what the match adds over your career.
- Retirement CalculatorProject your retirement savings with employer match, annual raises, and inflation. See your nest egg in today's dollars, year by year.