Ever wondered about that employer match thing on your benefits plan at work? What are those percentages and why not just forego setting money aside?
I am going to show you some numbers on this page that will explain how much money you are leaving on the table if you aren't taking the full employer match that is being offered.
Now, the percentage will change, but companies usually match your contributions between 3-6% of your income. That means if you contribute 6% of your income to your 401k, then your company will match your contribution dollar-for-dollar up to 6% of your income. Don't worry, I flesh this idea out in the table below so you'll see what I mean. I give examples for a person who makes $20,000 and $40,000 a year. Here are the explanations of each column:
Income: How much income the employee makes
% check: Based on your contribution percentage of 1 to 6%, what is the dollar amount of that % per paycheck? I'm assuming you are paid bi-monthly or 24 times per year.
$ Emp: The dollar amount that your company contributes to your 401k based on how much you are putting towards it
Total match: How much money your company contributes on an annual basis to your 401k if your percentage stays the same all year
Total cont: The employer's contribution plus your own. It should be double the total annual match of the company.
$ forfeit: How much money you are not collecting per year that you could be collecting from your employer based on your contribution % towards your 401k.
This chart is for an annual income of $20,000:
% check $ Emp Total match Total cont $ forfeit
1% = $8.33 $8.33 $200 $400 $1000
2% = $16.66 $16.66 $400 $800 $800
3% = $33.33 $33.33 $600 $1200 $600
4% = $41.66 $41.66 $800 $1600 $400
5% = $49.99 $49.99 $1000 $2000 $200
6% = $58.32 $58.32 $1200 $2400 NONE
This chart is for an annual income of $40,000
% check $ Emp Total match Total cont $ forfeit
1% = $16.66 $16.66 $400 $800 $2000
2% = $33.33 $33.33 $800 $1600 $1600
3% = $49.99 $49.99 $1200 $2400 $1200
4% = $66.65 $66.65 $1600 $3200 $800
5% = $83.31 $83.31 $2000 $4000 $400
6% = $99.98 $99.98 $2400 $4800 NONE
“You may learn something, and whether what you see be 1% or 6%, that may be profitable, and yet it may not. Seeing is both good and perilous.”