How 401(k) employer matching works

How matches are worked out, how much to contribute to get the full match, vesting, and what it adds up to.

Many US employers add money to your 401(k) when you save into it. This match is one of the best deals in personal finance — an instant return on your money — but only if you save enough to get all of it. How a match works Your employer puts in money based on what you contribute, up to a limit. Common formulas include: How much to contribute To get the whole match, contribute at least the percentage the formula covers. With a 50% match up to 6%, that is 6%. Contributing less leaves free money unclaimed. On a $60,000 salary with a 50% match up to 6%: if you save 6% ($3,600 a year), your employer adds $1,800. If you save only 3% ($1,800), they add just $900 — you miss out on $900 a year. Vesting: when the match is yours Your own contributions are always yours. The employer’s match may vest over time, meaning you only keep it after working there for a set period. Common schedules are cliff vesting (all of it after, say, three years) or graded vesting (a bit more each year, for example 20% a year). If you are thinking about changing jobs, check your vesting schedule first. Leaving a few months early can cost you thousands. Traditional or Roth Traditional 401(k) contributions come out be…