ôô

Should I Count Matching Funds In My Retirement Plan?

Money Girl explains how and why an employer matches a portion of your contribution for retirement - and why you may never see that money again.

By
Laura Adams, MBA

Should I Count Matching Funds In My Retirement Plan?

 

Q. In Financial Advice That Will Make You Rich, you recommend saving 10% of gross income for retirement. If your employer matches 3% of your contributions, should you still contribute 10% for a total of 13%—or should the combined total just be 10%?

A. Some workplace retirement plans put a vesting schedule on employer matching. That means you have to stay employed for a certain period of time before you own 100% of the company’s matching funds and their earnings. If you leave before you’re fully vested, you forfeit all or a portion of them.

For this reason, I recommend playing it safe and contributing 10% of each paycheck to your retirement plan, regardless of the match you receive. After you’re vested, you can always reevaluate your retirement savings using a Retirement Calculator. That’s the best way to know if you’re setting aside enough each month to achieve your financial goals and enjoy the retirement of your dreams!

More Articles You Might Like:
What is an IRA Rollover?
7 Days to Healthier Personal Finances
What is a SIMPLE IRA or 401(k) Retirement Plan?
A Checklist to Measure Your Financial Success
 

Retirement Ahead photo from Shutterstock

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. 

The Quick and Dirty Tips Privacy Notice has been updated to explain how we use cookies, which you accept by continuing to use this website. To withdraw your consent, see Your Choices.