I don’t always quote other people’s mothers, but when I do, it’s usually about money.
My last work conversation on a recent day ended like this. Me to former colleague: Are you in the 401(k) plan in your new job?
Him: “I know, I know, I should be, my mother keeps reminding me!”
What else did your mama say to you? She may not have said “a penny saved is a penny earned”, a la Ben Franklin, but I bet she had a few words to say about money over the years.
Whether Mom gave you advice or not on your retirement savings, she probably would agree that you should not overlook free money. And many people do. If your boss offered you a 3% raise-in addition to anything else, you wouldn’t turn it down, would you?
Here’s the benefit my colleague is currently passing up:
100% match of 401(k) contributions of up to 3% of your gross income
Now this company has some other wonderful benefits, but let’s focus on the extra 3% of compensation that I allude to above. This is the same number as the predicted average raise in the US for 2013.
- 3% of $75,000 = $2250 each year
- 3% of $50,000 = $1500
- 3% of $40,000 = $1200
This will become your money quickly. Usually you are fully vested in employer matching contributions in three years. Plans do vary, so ask your 401k administrator:
When do the matching contributions vest (or when will I own these contributions?)
There may be some free money lying on the floor right in front of your desk. Reach out and take it!
- 401k: A Great Way to Save (creditrepair.com)
- Why Saving for Your 401(k) Matters (allstate.com)
- 401k vs Roth 401k: Calming the Confusing Chaos (fatwallet.com)