From CNBC: 2024-09-20 13:40:48

Investing in the stock market is unpredictable, guided by news cycles and investor sentiment. However, one guarantee in investing is the 401(k) match, where employers match worker contributions up to a cap. This is often referred to as “free money,” doubling profits for workers.

About 80% of 401(k) plans offer a matching contribution, with the most common formula being a 50-cent match for every dollar contributed by the worker, up to 6%. This can lead to a total contribution of 9% of the worker’s pay in their 401(k) account, providing a guaranteed return of over 50%.

A dollar-for-dollar employer 401(k) match can significantly impact retirement savings over time. Financial advisors recommend aiming to save at least 15% of annual salary when factoring in worker and company contributions. However, these matches may come with vesting requirements, where workers must stay at a company for a set period to fully own the match.

Approximately 60% of companies require workers to stay for two to six years before fully owning their match, with the remainder having immediate vesting policies. Leaving before the vesting period could result in forfeiting some or all of the match, emphasizing the importance of understanding and fulfilling these requirements.

Read more: A 401(k) match is one the ‘rare guarantees’ in investing, CFP says