401(k) Employer Match Explained
The employer match is the closest thing to free money in personal finance. Here is how match formulas work, what vesting means, and how to make sure you get every dollar.
Most employers match 50 to 100 percent of your contributions up to 3 to 6 percent of salary. Vesting schedules determine when matched dollars become fully yours. Contributing below the match cap leaves guaranteed money unclaimed every paycheck.
Common match formulas
The two most common formulas are 50 percent up to 6 percent of salary, and 100 percent up to 3 or 4 percent. On an $80,000 salary, the first formula pays up to $2,400 a year and the second up to $3,200. Some employers use a tiered formula, like 100 percent on the first 3 percent plus 50 percent on the next 2 percent.
Your plan documents or HR portal state the exact formula. It is worth ten minutes to find it, because the formula tells you the precise contribution rate that captures everything.
Vesting: when the match becomes yours
Your own contributions are always 100 percent yours. Employer matches may vest over time, commonly over 3 to 6 years on a graded schedule. Leave before you are vested and you forfeit some or all of the matched dollars.
Safe harbor plans vest immediately, which is common at smaller companies. If your plan has a vesting schedule, factor it into job-change timing: leaving two months before full vesting can cost thousands.
True-up contributions and timing traps
Some employers match per paycheck rather than annually. If you max out your contributions early in the year, later paychecks have zero contributions and earn zero match. Spreading contributions evenly across all paychecks avoids this trap.
Some plans offer a true-up, an end-of-year correction that pays the match you would have earned. Ask HR whether yours does. If not, divide your annual target by the number of paychecks and set that as your per-paycheck rate.
Skip the arithmetic
Add your match rate to the free 401(k) calculator and see its lifetime value.
Employer match questions
What is a good 401(k) match?
The median match lands around 3 to 4 percent of salary in total employer dollars. A dollar-for-dollar match up to 6 percent is excellent. When comparing job offers, convert the match to dollars on your expected salary: a 1-point better match on $100,000 is $1,000 a year, every year.
Do I lose my 401(k) match if I quit?
Your contributions and their earnings are yours from day one. Employer match dollars follow the plan vesting schedule, so check how much of the match is vested before you resign. Many people time departures for just after a vesting milestone.