It's not a given that your employer will give you access to a 401(k) plan. And even if you have a 401(k), it's not a given that your employer will offer some type of matching incentive.
However, Vanguard recently reported that 95% of its retirement plans offer an employer's matching contribution. And that's an important workplace benefit to chase, since it means getting free money in your account.
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But being privy to an employer match doesn't just mean getting extra funds in your 401(k). It could also, depending on your earnings, get you to a place where you're able to allocate a more ideal portion of your income to your retirement plan.
You can potentially get closer to a more optimal savings rate
Even though 401(k) plans come with generous contribution limits, there are limits nonetheless. This year, for example, you're limited to $23,000 if you're under the age of 50. If you're 50 or older, that limit rises to $30,500 thanks to a catch-up opportunity.
Meanwhile, let's say you're 45 years old earning $230,000 a year, and you max out your 401(k) at $23,000. That's a lot of money in theory to be setting aside for retirement in a single year. But it's actually not such a large percentage of your salary.
In this case, you're socking away 10% of what you earn. But many financial experts say that these days, it's best to set aside 15% to 20% of your income for retirement -- or even more, if possible.
The upside of being privy to an employer match in your 401(k) is that the money your company puts in does not count against your contribution limit for the year. So let's say your employer will kick in another $5,000 for your 401(k). All told, you're putting $28,000 into that account.
That's still not 15% of your earnings. Rather, it's a little over 12%. But that's still a more optimal savings rate than 10%.
What if your current employer doesn't offer a 401(k) match?
If your company has a 401(k) plan without a match, you may want to consider making a move to another employer if there's additional upside to doing so -- for example, the opportunity to snag a promotion or raise. But before you jump ship, try to fight for that 401(k) match.
Round up your colleagues and present a case for a match. Share data that points to most employers offering this perk, and try to persuade your employer to follow suit.
You may even suggest that your employer forgo other workplace benefits to make room for a 401(k) match. Free snacks may be nice to have. But money for your retirement may be even more helpful. So if your employer only has so much money to spend, encourage the powers that be to spend it on something that could have a much stronger impact.
Of course, if your employer does offer a 401(k) match, you should aim to take advantage of every single dollar it entails. Doing so could make it so you're able to close out your career with a lot more retirement savings.
