12th & Good Street

“What's a 401(k) match, really?”

The answer

It's money your employer adds to your retirement account when you put money in yourself — a matching contribution. A common setup is something like "50% of the first 6% you contribute," which means if you put in 6% of your paycheck, your employer adds another 3% on top.

The part worth sitting with: this is part of your compensation. It's not a bonus or a favor — it's pay you only receive if you contribute enough to collect it. If you're not contributing up to the full match, you're leaving part of your paycheck at the office.

Every plan's formula is different, and it lives in a document called the Summary Plan Description (or you can just ask HR: "what's our match formula?"). That one question is worth asking this week.

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Related questions

Employer Match“Does my employer's match count toward my contribution limit?”Employer Match“Is my 401(k) match actually good, or am I just guessing?”Leaving a Job“What happens to my 401(k) if I leave?”Contributions“Is my 401(k) contribution pre-tax or post-tax?”