Nothing's better than free money, and matching contributions from your employer to your 401(k) account amount to exactly that. It's almost always a good idea to contribute at least enough to your 401(k) to get the full amount of employer matching.

However, some people who look to maximize their 401(k) contributions can sometimes inadvertently end up missing out on some matching contributions. In order to get the most from matching, you might need to adjust your savings behavior slightly.

How 401(k) matching works

Most employers that offer 401(k) matching do so up to a certain amount of employee contributions. Commonly, you'll find either dollar-for-dollar matches or a 50% match. For instance, one employer might offer you a full match on contributions of up to 3% of your salary, while another might give you 50% matching on contributions up to 6%. In either case, contributing at least the appropriate amount will get you a 3% matching contribution from your employer.

401(k) nest eggs.

Image source: Getty Images.

The simple way to maximize your matching in this case is to make sure that you set your contribution percentage at least as high as the maximum matching percentage. In the first example above, saving 3% would be enough to max out the match. In the second example, though, you'd need to set your contribution percentage at 6%, even though you'd end up getting just the 3% match under the 50% system.

When saving too much can cut your matching

Some workers seek to go far further than this with their retirement savings, instead looking to maximize their entire 401(k) contribution. Limits are $18,000 for those under age 50 and $24,000 for those 50 or older in 2017, and it takes commitment to reach those levels. Some people, however -- especially those who have high incomes -- manage to make those full contributions each year.

For these individuals, though, there's a different potential pitfall. If you set your contribution percentage too high, then you'll reach the annual contribution limit early. If you're not careful, that can prematurely end your matching.

Take a simple example of someone who's 47 and earns $180,000 per year, and arranges to have 20% of each monthly paycheck contributed to the 401(k). That $180,000 annually works out to $15,000 per month, and a 20% contribution is therefore $3,000. At that rate, the person will max out their 401(k) contributions after six months.

Some employers will apply the maximum monthly match during those first six months, but once the employee contributions stop because the worker has reached the maximum, the employer might also stop making the match. That could cost the worker half of the matching contributions the employer would typically make.

Adjusting your contributions to maximize matching

Fortunately, there are steps you can take to avoid this problem. If you set your contribution percentage lower, then you'll make contributions throughout the year. That will, in turn, ensure that you get your match year-round.

In some cases, the calculations can get tricky. However, the calculator below will help you set the exact percentage you need.

Editor's note: The following language is provided by CalcXML, which built the calculator below.

 

* Calculator is for estimation purposes only, and is not financial planning or advice. As with any tool, it's only as accurate as the assumptions it makes and the data it has, and should not be relied on as a substitute for a financial advisor or tax professional.

Using the above example, you can see that the sweet spot is 10%. That will max out the worker in December, giving the employer the chance to make full matching contributions.

Employer 401(k) matches are free money, and you deserve to get as much of it as your employer will give you. By using this simple strategy, even those who save as much as they can will still get the full benefit of employer matching to their retirement accounts.

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