An employer match is money an employer may add to a retirement plan when an employee saves under the plan's rules.
What it means
A common rule matches part of what you put in, up to a limit. The exact formula belongs to the plan, not to a universal rule.
Your contributions are generally yours. Employer money may require you to stay at the job for a period of time before it is fully yours. That is called vesting.
A simple example
You earn $80,000 a year. Your plan adds 50 cents for each $1 you save on the first 6% of pay. Saving 6% means you contribute $4,800, and the employer may add $2,400 under that formula.
If you save only 3%, you contribute $2,400 and may receive only $1,200 from the employer. You could leave another $1,200 of available match unused. But check the actual plan: some employers match each paycheck, some add a year-end adjustment, and employer money may not become fully yours until you meet the vesting rule.
What people often miss
Some plans match each paycheck and may not fully make up missed contributions later. Others use a year-end true-up.
The match formula, vesting rule, and eligible pay can all change the amount.
Three questions worth asking
- What is the exact match formula?
- Am I saving enough to receive the full match?
- When is employer money fully vested?
Checked against primary sources
This explanation was checked against the sources below. Rules and limits can change, so check the source before making a decision.
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