Socking money away in a retirement plan requires discipline. After all, the money you contribute to that plan is money you won't have available to spend on other things, whether it's essential bills or leisure. But if you have a 401(k) through your employer, contributing to that plan could render you eligible for a company match. If you put in enough of your own money to snag that match, you could end up a lot wealthier once your time in the workforce comes to an end.
Don't give up that match
Many employers who offer 401(k) plans also match worker contributions to varying degrees. If yours has this type of program in place, it means you could be entitled to free money in your retirement plan that could help you grow serious wealth in time for retirement.
How much wealth are we talking about?
Imagine you earn $60,000 a year and your employer is willing to match contributions that equal up to 5% of your salary. This means that if you put $3,000 of your own money into your 401(k), your employer will contribute another $3,000. Over that time, that could add up to a lot of extra money.
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In fact, an extra $3,000 a year in employer matching dollars could leave you with almost $600,000 more in your 401(k), assuming you collect that match for 40 years and your 401(k) investments generate an average annual 7% return, which is a reasonable assumption with a stock-heavy strategy. To be clear, that's $600,000 in free money -- a combination of company matching dollars and gains.
Of course, this $600,000 sum is an arbitrary one based on a single example. It's also an imperfect example, as it assumes the same salary, contribution rate, and match over time (often, all of those figures will evolve as your career progresses). The point, however, is that if you manage to take advantage of your full employer match, you could end up with a serious load of extra cash in time for retirement. That additional money could spell the difference between getting to travel and live the lifestyle you want versus pinching pennies and worrying about keeping up with your bills.
If you can't manage to contribute enough of your salary to snag your full employer match right now (say, your bills are just too burdensome or you have high-interest debt you really need to pay off), do your best to contribute what you can. After all, a partial match is better than no match at all.
Secure your future
The money in your 401(k) will play a huge role in your retirement finances. After all, Social Security only pays the average senior today a little over $18,000 a year, and you'll probably need a lot more money than that to live comfortably. Capitalizing on your employer's 401(k) match is a great way to set yourself up for a stable retirement on somebody else's dime, and if you play your cards right, you could end up with hundreds of thousands of extra dollars by virtue of a match alone.
