If your employer offers a 401(k) match and you’re not contributing enough to get all of it, you’re leaving part of your compensation on the table. It’s one of the few no-brainers in personal finance. But match formulas can be written in confusing ways, so let’s break them down.
What a match is
Many employers add money to your 401(k) based on what you contribute. If you put in nothing, they put in nothing. If you contribute enough, they add a percentage of your salary on top.
Common match formulas
“100% match up to 4% of salary”
For every dollar you contribute, your employer adds a dollar, up to 4% of your pay. On a $60,000 salary, contributing 4% ($2,400) gets you another $2,400.
“50% match up to 6% of salary”
Your employer adds 50 cents per dollar, on contributions up to 6% of pay. On $60,000, you’d contribute $3,600 (6%) to get $1,800 (3%). Contributing only 3% would get you just $900. This is where people most often miss part of the match.
Tiered matches
For example, 100% on the first 3% and 50% on the next 2%. Contribute 5% and you’ll get 4% from your employer.
Non-elective contributions
Some employers contribute a fixed percentage whether you contribute or not. That’s not technically a match, but it’s still money for you.
Why the match beats almost any other use of the money
A 100% match is an instant 100% return on your contribution before any market growth. A 50% match is an instant 50%. Even paying off a 25% credit card doesn’t beat that. That’s why most planners put “get the full match” right after building a starter emergency fund.
Vesting: when the match is actually yours
Your own contributions are always 100% yours. Employer contributions may “vest” over time. Two common types:
- Cliff vesting: you own 0% until a certain point (no more than three years under federal rules), then 100%.
- Graded vesting: you own a growing percentage each year, reaching 100% within six years at most.
If you’re thinking about changing jobs, check your vesting schedule first. Leaving a few weeks before a vesting date can cost thousands. The U.S. Department of Labor explains your rights in its retirement plans section.
Watch out for “true-up” and per-paycheck matching
Some employers calculate the match each pay period. If you front-load contributions and hit the annual limit by, say, September, you may miss the match on the remaining paychecks unless your plan has a “true-up” provision. If you’re a high saver, ask HR how your plan handles this.
2026 contribution limits
For 2026, you can contribute up to $24,500 of your own money to a 401(k). If you’re 50 or older, you can add an $8,000 catch-up, and people aged 60 to 63 may be eligible for a higher catch-up under recent law changes. Employer contributions don’t count against your personal limit, though there’s a higher combined cap. The IRS limits page has current numbers.
Roth or traditional 401(k)?
Many plans offer both. The same logic as IRAs applies: pay tax now (Roth) or later (traditional). Our Roth vs. traditional guide walks through how to decide. Employer matches have historically been pre-tax, though recent rules allow employers to offer Roth matching.
What to invest in
Your contributions sit in whatever funds you choose. Many plans default to a target-date fund, which is reasonable for most people. If you choose your own, look for low-cost index funds and check their expense ratios.
Bottom line
Find your plan’s match formula, contribute at least enough to capture the full amount, and know your vesting schedule. Then raise your contribution by 1% every year or with every raise. It’s the closest thing to free money most of us will ever see.
