The Icing on the Cake

You don’t want to overlook a potential benefit that can make a huge difference in the size of your retirement account: a matching contribution from your employer.

Employers aren’t required to provide a match, but those who do typically add pretax money to your account, figured as a percentage of what you contribute — perhaps 50% of what you put in, up to 5% or 6% of your salary.

Here’s an example: You earn $50,000 and contributed 6%, or $3,000. Your employer adds 50% of the $3,000, or $1,500. So a total of $4,500 goes into your account during the year.

The only catch is that you have to work for the employer for a minimum amount of time before you have a right to keep the match and the earnings it produces. That’s called being vested. The vesting period is described in the plan documents your employer will provide. It can’t be longer than six years but could be shorter.

 

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