There are many employees in the United States that diligently contribute to their employer-sponsored 401k plans every time that they receive a paycheck from work. These saving plans are considered to be one of the best ways for a worker to save for their retirement years. If your employer offers the ability to contribute to a 401k plan, it is important to educate yourself about the particulars of the plan to determine whether it will be worth your while to contribute to it. Here are some things that every employee should know about 401k matching contributions.
Taking Advantage Of Employer Matching Contributions
For many employees, employer matching contributions are offered to help the employee boost the balance of their retirement fund. This matching contribution is offered up to a certain percentage of the employee’s income, which will depend on the specific employer. Many workers choose the amount that they deposit into their 401k account from each paycheck based on the percentage of their income that their employer is willing to match and deposit as an additional contribution.
Matching Contributions Are Not Vested Right Away
In order to ensure that their employees do not simply take the company’s money and run to a different job, some employers require that their employees stay in their jobs for a certain amount of time before they can claim the employer’s matching contributions to their 401k account as their own, also known as vesting. In many cases, the employee must remain with their employer for a year before the matching contributions are vested. If the employee leaves the company before this time period has expired, they forfeit the matching contributions that have been deposited into their 401k account. If you are not planning on staying with the company for a significant amount of time, it may not be worth it to you to contribute to a 401k account while you are there.