This Automatic 401(k) Feature Could Be the Most Powerful Tool in Your Retirement Plan

Key Points

• Many 401(k)s offer employer matches, which could double your annual contributions.

• Your employer-matched funds could be worth tens of thousands of dollars by retirement.

• Familiarize yourself with your 401(k)'s vesting schedule if you plan to leave the company soon.

• The $23,760 Social Security bonus most retirees completely overlook ›

You'd probably be pretty happy if you earned a 10% annual return on your 401(k) investments. That's a significant leap, and if you can continue to earn that amount year after year, those earnings will do a lot to improve your financial security in retirement. But you can't be sure of a consistent return when investing, and there's always some risk of loss.

Fortunately, you're not just at the mercy of stock market returns. There's a way you could see 50% or even 100% returns on your 401(k) contributions each year, and it might be easier than you think.

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Don't leave your 401(k) match on the table

When you joined your 401(k) plan, you probably chose a dollar amount or a percentage of your income that you wanted to be deferred from each paycheck. Many companies match these contributions, up to a certain percentage of your income, to help you grow your retirement savings even faster.

Every company's matching formula is different. Some have a 100% match, where your employer gives you $1 for every $1 you put into your 401(k), up to a certain percentage of your income. Others only give you $0.50 for every $1 you contribute. But in either case, the match can make a substantial difference to your retirement savings.

Say you earn $60,000 per year, and you get a 100% match on up to 4% of your income. That means for every $2,400 you put into your 401(k), your employer gives you another $2,400. You're already doubling your money, and that's before you consider any investment earnings you'll get on those funds between now and retirement.

If you claimed this $2,400 match for 20 years and earned a 10% average annual return during that time, your total matching contributions would be worth over $137,000. Your portfolio's actual value, including personal contributions, would be nearly $275,000. That's despite you contributing just $48,000 of your own money during that time. That's likely not enough to retire on, but it demonstrates that, with the help of your match, you can wind up with a lot more than you might expect.

How to claim your company's full 401(k) match

The only thing you have to do to claim your 401(k) match is put money into your own 401(k) or Roth 401(k) during the year. There are only a few months left in 2025, so if you haven't gotten your full match yet, try to give this your full attention during the last quarter of the year.

If you're not sure whether your employer offers a match or how it's calculated, check with your HR department. If you haven't claimed the entire amount yet, divide the amount you have left to save for 2025 by the number of pay periods left in the year. Aim to defer this amount -- or as close as you can get -- so you get the most money possible.

One thing to be careful of if you're planning to leave the company soon is your vesting schedule. This determines how much of your match you get to keep if you quit.

If you've been at your company more than six years, you have nothing to worry about. But if you haven't worked there that long, there's a chance you could forfeit some of your match by switching employers. In that case, you might need to save more on your own to reach your retirement goals.

Once you've come up with a plan to get your 2025 match, it's time to start working toward your 2026 match. Repeat the process above to figure out how much you have to defer from each paycheck to get the whole thing, and start right away in January.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

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