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Maximize your employer's 401(k) match
The best investment offer in the world is the 401(k) match.
Many employers offer a 401(k) match. The match encourages employees to contribute to their own plans.
The match should be considered a return on your investment equal to the matching percentage. A 50% matching contribution is the same as a 50% investment return on your contribution.
BUT, the matching contribution is risk-free, and the stock market is risky.
Wait, it gets even better. At 10% growth per year for 20 years an initial contribution of $14,000 would grow to $94,000. But with the employer's match, that $14,000 would grow to $141,000, for a 12% return. OK, so you can boost an expected 10% return to over 12% without additional risk? Hopefully, we've convinced you.
Anything to be aware of?
Some employers match a maximum amount per pay period, for example, a match of 50% of the first 6% per pay period up to a dollar limit.
The IRS limit for 401(k) contributions in 2006 is $15,000 ($20,000 for folks over 49). If you contribute over 6% per pay period, you could reach the 401(k) maximum before you reach the employer's maximum.
Be aware that bonuses typically have 401(k) contributions deducted which could cause you to reach the IRS limit before you receive the maximum matching contribution.
Feel free to contact us if you want help maximizing your match.
