Retirement and Social Security
Definition
Money an employer adds to your workplace retirement account based on how much you contribute.
What it means
Many employers that offer a 401(k) or 403(b) match part of what employees put in. A common formula is 50 cents per dollar up to 6% of pay, or dollar for dollar up to 3% or 4%; each plan sets its own formula, which is in the summary plan description. Matching money may be subject to a vesting schedule, meaning you must work a certain number of years before you fully own it. Under federal rules, matching contributions in most 401(k) plans must vest at least as fast as a three-year cliff or six-year graded schedule. Your own contributions are always 100% vested. Since 2023, plans may let employees choose to receive matches as Roth contributions, and some plans may count student loan payments toward matching.
Example
On a $50,000 salary with a dollar-for-dollar match up to 4%, contributing 4% ($2,000) brings a $2,000 match. Contributing only 2% would leave $1,000 of matching money unclaimed.
Illustrative numbers only. Your situation will differ.