401 k matching contributions is free money to you

Typically, when you start your new job, you will have a waiting period until you are elgible to get 401k matching contributions from your employer. However, it is worth the wait. My employer for example, matches 100% up to 6% of my pay. That sounds more confusing than it really is, let me further explain; Say I make $100,000 per year – if I was having 5% of my pay deducted and invested in my 401k, my company would match 100%, thus my 401k deposits would automatically double, for FREE, and instead of having $5,000 invested per year, I would have $10,000. You can’t beat that! Now take that same example again, say I had 10% of my pay deducted to be invested in my retirement plan; My company would match 100% of the first 6%, so my $10,000 would actually be $16,000. You’d be a sucker not to participate in the plan, even if the market was only returning less than the rate of inflation at that time.

Truly, an employers match is free money, however, in many cases in order to collect all that money you must be fully vested (if you’re not sure what this means, check out my article on vesting).

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