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Participate in your Employers 401(k) Match Program

Posted by Ben
February 27, 2008

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Employers are slowly moving away from the traditional pension plans that many of our parents enjoy and now offering an employee match program. This means employees can no longer sit back and let others make their retirement decisions for them, but must be proactive in planning their futures.

What is an Employer Match Program?
Participants of an employer match program will receive a dollar for dollar match on money taken out of each of their paychecks up to a certain percentage that is then placed into a sponsored retirement plan (ex. 401k or 403b). It’s important to understand that companies will offer a 100% match on your savings up to a certain percentage of your salary, usually, anywhere from 4-6% of your pretax salary. For example, if you make $50,000/year and put 6% of your salary into a 401(k) account, you would save $2,000/year. Now, add the 6% match from your employer and now you saved $2,000 from your employer to give you a yearly savings/investment of $4,000.

Take it, it’s Free Money!
While we can understand the hestitation of putting money into a savings plan bi-weekly because your paychecks will shrink, it’s important for you to understand that by participating your paychecks actually increase! Keep in mind that an 8% return on an investment in one year is considered a good investment. When your employer is offering you a match on your savings, you are already up 100% on your investment for the year. Just to try to stress the point even further, consider the example above, if you participate in your employer match program for 30 years, earning an average of 8% a year on your investments and make $50,000/annually with 6% match you would accumulate $496,289 over the 30 years. Only $60,000 of the $496,289 is actually coming from your check, the rest is employer matched and interest. Take it, it’s free money! $



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Comments
Comment by BytesLandNo Gravatar on February 23, 2011 @ 9:21 am

well, I see this post is a bit out of date, but I can’t but agree with the tendency you noticed: employers are slowly moving away from the traditional pension plans that many of our parents enjoy and now offering an employee match program. I wonder if things changed much in 2 years.

Comment by Inflammatory DiseaseNo Gravatar on March 2, 2011 @ 7:35 am

Even though it might be outdated, it actually enforce the employer to match the employee pay and offer alternative savings rather than the regular pay. This will encourage savings among the employees.

Comment by Swollen GlandsNo Gravatar on March 10, 2011 @ 12:35 pm

Thank you for spending the time to share this. Very informative! swollen glands

Comment by antibiotics and alcoholNo Gravatar on March 12, 2011 @ 3:02 am

well, I see this post is a bit out of date……i like it!

Comment by Michael KingsleyNo Gravatar on April 24, 2011 @ 10:34 pm

Some countries have a match program for retirement in place. This is a responsible approach and one that the younger generation must take seriously.

Comment by Julia BakerNo Gravatar on April 28, 2011 @ 5:14 am

Too often many do not realize that how they retire entirely lies in their own hands, and this program not only encourages saving while working, but also a form of security for both the employer and employee.

Comment by Oferte de cazare in Bran - MoeciuNo Gravatar on July 4, 2011 @ 7:23 am

This is great.. you can receive a lot of moneys. Employers 401(k) Match Program is a great program for those who will participate.

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