In the link I shared here and there , I touched upon employer match to 401k.
One common match done by employers is 50% of employee match upto first 6%. What it really means is that employer will match 50% of employee's contribution, but they will not contribute more than 3% of the paycheck at any point of time.
How does this play out?
If you are earning $1,00,000, and contributing 18% a month to 401k, you will be putting in $750 a month. If your employer has 50% of employee match upto first 6%, it would mean that employer will add $125 a month - that is $3000 of free money added to your 401k by end of the year.
To maximize, you may need to add at least 6% to your 401k every month (that's how most plans are typically set up, please check with your company as well as your plan administrator) to be sure. If they do what is called as "true-match", you are one of the lucky ones.
One common match done by employers is 50% of employee match upto first 6%. What it really means is that employer will match 50% of employee's contribution, but they will not contribute more than 3% of the paycheck at any point of time.
How does this play out?
If you are earning $1,00,000, and contributing 18% a month to 401k, you will be putting in $750 a month. If your employer has 50% of employee match upto first 6%, it would mean that employer will add $125 a month - that is $3000 of free money added to your 401k by end of the year.
| Date | Paycheck | Employee contribution | Employer Match |
| 1/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 1/31/2015 | $4,166.67 | $750.00 | $125.00 |
| 2/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 2/28/2015 | $4,166.67 | $750.00 | $125.00 |
| 3/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 3/31/2015 | $4,166.67 | $750.00 | $125.00 |
| 4/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 4/30/2015 | $4,166.67 | $750.00 | $125.00 |
| 5/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 5/31/2015 | $4,166.67 | $750.00 | $125.00 |
| 6/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 6/30/2015 | $4,166.67 | $750.00 | $125.00 |
| 7/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 7/31/2015 | $4,166.67 | $750.00 | $125.00 |
| 8/15/2015 | $4,166.67 | $750.00 | $125.00 |
| 8/31/2015 | $4,166.67 | $750.00 | $125.00 |
| 9/15/2015 | $4,166.66 | $750.00 | $125.00 |
| 9/30/2015 | $4,166.66 | $750.00 | $125.00 |
| 10/15/2015 | $4,166.66 | $750.00 | $125.00 |
| 10/31/2015 | $4,166.66 | $750.00 | $125.00 |
| 11/15/2015 | $4,166.66 | $750.00 | $125.00 |
| 11/30/2015 | $4,166.66 | $750.00 | $125.00 |
| 12/15/2015 | $4,166.66 | $750.00 | $125.00 |
| 12/31/2015 | $4,166.66 | $750.00 | $125.00 |
| Total | $100,000.00 | $18,000.00 | $3,000.00 |
To maximize, you may need to add at least 6% to your 401k every month (that's how most plans are typically set up, please check with your company as well as your plan administrator) to be sure. If they do what is called as "true-match", you are one of the lucky ones.
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