Max Your Employer's Match

My Story

When I started work with my current employer, I was taking a several thousand dollar pay cut. In fact, after they offered me the job and I found out what the salary was, I hung up the phone and “cried out loud.” That’s not just a saying, y’all. I cried out loud. I was scared I wouldn’t be able to make ends meet. We were just getting by as it was. But I had tried, for at least five years, to “get in” with the government and I was counseled by several people I respect, to take the chance, so I did.

During orientation, they discussed the employer match program and it sounded like a good thing and saving certainly was something I wanted to do. But I was taking a pay cut as it were, so I signed up for the minimum I could do, 1%.  I had hopes to increase it, but it wasn’t until a conversation with someone at work, nine years later, that I was challenged to always max the match. They actually encouraged me to do more (10%) and I made that my goal by the following year and actually did it for a short while. What I never forgot though was, to max the match (my words not his).  I at least match the max.

Employer Match Explained

So, what is an employer match? It’s a program in which your employer matches the money you contribute towards your own retirement account. They get government incentives for helping you do this. The more money you have for retirement, the less you will be dependent on the government. Your employer helps the government, help you and in return the government helps your employer. This is good for us. The employer match program usually matches a certain dollar to whatever percentage (or dollar amount) you contribute, up to a maximum.

Example

Let’s say your employer, matched $1 for every $1 that you contribute, up to 3% of your wages and then $ .50 for every $1 for another 2% of your wages. If your wages were $2000, and you maxed the match it would look like this:

You would contribute 5% of your pay to the match program.

$2000×3% = $60 contributed from you and $60 contributed from your employer ($1 for $1).

$2000×2%= $40 contributed from you and $20 contributed from your employer (50¢ for $1).

Your retirement account now has, from this one paycheck, $180 from you and your employer.

If you saved this money in your own savings, outside of the payroll match program, you’d have $100 and would have missed out on $80. If you put your $100 in any kind of stock, bond, or other investment, you are almost guaranteed not to out-perform your employer’s match program. Worse yet, if you don’t start saving something, you will have nothing.

If your current employer doesn’t offer a match program, start saving anyway. Take advantage of your employer’s retirement program or your own individual retirement account, or some other investment- but start saving sooner than later.

Conclusion

We have to do what is right for our own situation. But there are some principles that all financial experts agree on- one of which is to save. All don’t agree on the best way to go about it, but all agree, that saving is non-negotiable.

I prioritize the employer match at the top of the savings hierarchy. I trump it over getting out of debt faster. I trump it over other types of savings and investments. Who else is going to give me a steady 100%, 50%, or %25 return? So, if you chose to take advantage of your employer’s match program, but can’t match the full match, start at the minimum. As you reduce expenses, increase your contribution. As you get raises, maintain your standard of living, and use that increased income to max out your match.

Too many people reach retirement with no plan. And although God is our ultimate provider, He still requires us to exercise wisdom; to take advantage of resources and opportunities He puts before us. Saving is good godly stewardship.

This information is purely educational; it is not intended for financial advice for you unique situation.