If I Could Tell Everyone Saving for Retirement 1 Thing, I'd Tell Them to Do This With Their 401(k)

Your 401(k) can be a great tool to help you reach your retirement savings goals, but like all tools, it can't do the work for you. You have to make the right decisions to help your savings grow as quickly as possible.

Everyone's strategy will look a little different, and that's OK. But there's one 401(k) move that virtually everyone should make if they can. It's not an option for everyone, but if it is for you, it should definitely be high on your priority list.

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Don't leave free money on the table

Many employers offer a 401(k) match to employees who defer a portion of their own paychecks for retirement. How much you get depends on your salary and the company's matching formula, but there's no doubt it's valuable.

If you earn $60,000 per year and you qualify for a 4% dollar-for-dollar match, you save $2,400 of your own and your employer gives you another $2,400 for your future. That's a nice bonus even before you talk about investment returns.

A single $2,400 match invested for 20 years and earning a 10% average annual return would be worth more than $16,000. If you earned a $2,400 match every year for 20 years, your matches alone would be worth nearly $137,500, assuming the same 10% average annual return. And your actual balance would be at least double that because you'd have your personal contributions as well. Most people also get raises from time to time, which could increase the match you're eligible for.

Even in the best-case scenario, saving just enough to claim your 401(k) match likely won't leave you with enough to cover all your living costs in retirement. But it can make saving enough feel a little less daunting.

How to claim your full 401(k) match

The first step to claiming your full 401(k) match is to learn how your company's matching formula works. Check with your HR department if you're not sure. Employers usually match either 100% or 50% of your contributions up to a certain percentage of your income.

Once you understand how the matching formula works, work out how much you have to set aside to get the entire thing. For example, if you get a 100% match on up to 4% of your income, you'd figure out what 4% of your salary is and make that your savings target.

If you've already made some 401(k) contributions for the year, subtract them from your target amount to figure out how much more you still have to save. Then, divide this amount by the number of pay periods left in the year to determine how much to defer from each paycheck. Aim to set aside at least that much if you can.

Troubleshooting tips

Saving your full 401(k) match is sometimes easier said than done. If you're not able to contribute the full amount, save what you can afford so you at least get some of your match. You might find yourself in this situation now if you're just getting started on your 2025 401(k) match.

Do the best you can in November and December and then start fresh in January. Follow the steps above to see if you can claim your full match by the end of 2026.

Another problem you might encounter is losing some of your match if you quit before you're fully vested in the plan. Check with your employer if you're not sure how its vesting schedule works.

You could avoid this by sticking it out with your employer until you've become fully vested. But this could take several years with some companies. If that's not feasible, you may have to accept that you'll lose some of your match by quitting. See if you can increase your personal contributions accordingly so you still come away with a similar amount of retirement savings.

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