401(k) Overview

Employer Contributions

Another great advantage of an employer-sponsored 401(k) plan is the possibility of a contribution match. It is usually designed to match contributions up to a certain percent of pre-tax income. For example, some businesses may offer a match up to the first six percent of income contributed to the plan. This means if someone making 100,000 dollars before taxes contributes 6,000 dollars per year to their 401(k), the employer will also contribute 6,000 dollars to the account. The most an employer can contribute to a 401(k) plan is 36,500 dollars, which is almost double the amount individuals can contribute themselves. Most financial advisors recommend to, at a minimum, contribute enough to your 401(k) to fully capitalize on the employer contribution match. Any amount contributed that is less than this figure is literally leaving money on the table. Those who fully take advantage of a 401(k) and all of the associated perks are usually most financially secure in retirement.