Odds are if you’re in the middle class, your 9-5 (or 6-2 if you’re like many) job likely offers a match for your 401k, or so I’d hope! Gone are the days for many of a solid pension that would be theirs after trading many years of a full career for a company. To be fair, that likely goes hand in hand with the frequent changing of employers.
There are several examples of matches out there, with some being 50% of employee contributions up to 6%, a straight 5% match, or some other combination. For example my employer offers 1% off the bat, regardless of my contribution. Then matches one for one if I contribute 3%, and 50% of the final 2%. All in all, as confusing as it sounds, that is a match of my 5% at exactly 5%.
While it is easy to look at the dollars you’d have to contribute to get your full employer match, it’s important to remember that this is essentially a part of your overall compensation from your employer that you’re leaving on the table if you don’t get the match. Only under extreme circumstances would it potentially make sense to not do that, and it would be some extremely high percentage debts or other.
It may also seem like a small amount when you first start. I recall contributing up to my first few thousand dollars and thinking it would take forever to see a real amount I could consider living off of. Now, 10-15 years later, it’s starting to grow at a real rate between contributions from myself and employer, and growth of the portfolio itself (minus 2022 of course).
In the end, the best thing you can do is at least contribute enough to get the match. Any amount over that should be considered and taken into consideration with your goals between retirement or taxable accounts.
What is your match?\