Matching 401k Contributions - The 401k Match

One of the best things about this retirement account option is the 401k match. These matching 401k contributions are money you won't be seeing elsewhere and is a great way to add some funds to your account.

But, what is this, exactly? These accounts are done through your employer. Your employer hires a financial company to hold your account and your employer sets up restrictions and investment plan options for you to choose from. As an incentive to sign up for the account, and as a benefit to your employment (just like your health insurance) you have the option to sign up for this account. Every employer decides on a different amount, but they will generally choose to do a percentage of your income (somewhere between 1%-4% of your income is typical). So then, if you contribute anywhere up to that percentage point, they will match that contribution directly to your account.

This means that if they agree to match you at 2%, and you contribute that much of your income to your account, they will also chip in that amount. This may seem like a very small amount of money, but it builds up over time--and don't forget, this money is invested in stocks, bonds, mutual funds, etc to help it grow even further over the years.

You may be choosing to take advantage of IRAs or other savings options instead, but you can do that at the same time. It's always a smart idea to diversify your retirement plans and have multiple savings plans happening at the same time. You won't be seeing this money in other plans, it's only offered in your employer sponsored account. If your employer offers you this plan, it's silly to not to take it, at least up to the point to take advantage of your matching 401k contributions. You can still invest in your other retirement plans at the same time. This is money you won't be seeing elsewhere, so you might as well take advantage of it.