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What is a match percent and up-to percent? And how does it help me in my plan 401k?

Jan 06, 2016 by Juan in  |  Flag
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The match refers to how much your employer will add for to your account when you make contributions to assist with with saving in your retirement account. The amount and percentage varies from company to company.

A common match is referred to as a safe harbor match where the employer will match dollar for dollar on the first 3% of pay, and 50 cents on the dollar for the next 2% of pay. So if you make $40,000, 3 % is $1,200. That means if you put $1,200 in during the year, they will add $1,200 to your account also - so your account is doubled by your employer. For each additional $1 you add over the 3% of pay ($1,200) until you hit 5% of pay ($,2000), they will add $0.50.

So if you contribute the match maximum of $2,000, your employer will add $1,600 on your behalf. You of course, may contribute more than $2,000 and likely should, but your employers generous match will not apply beyond the cap.

This is a complex match. Many are more simple such as a 50% match on the first 10% of pay. So if you are earning $40,000, for ever dollar you contribute up to $4,000 (10% of pay), your employer will add $0.50 to your account as a free gift.

Matches can be confusing. I hope you find this information helpful. If so, please like the reply! :)

Warm regards,

Comment   |  Flag   |  Jan 07, 2016 from East Dundee, IL

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