On today’s DueNorth Insight we’re going to talk about your 401(k) match. So what is a 401(k) match? Well it’s a part of your employer's total compensation package. So if this is something that you’re offered, you’re going to want to take advantage of it because essentially it’s free money that you can add to your compensation.
So a couple of things to talk about with your 401(k) match – it can be either wholly or partially up to what you contribute dollar for dollar up to the percentage that they want to contribute. So what this means is that if you’re contributing 5% to your 401(k), your employer might say that they’ll contribute dollar for dollar up to 3% or whatever that percentage may be. It’s also important to note that it’s over and above the individual contribution limit.
And so what that means is the contribution limit for 2021 in a 401(k) is $19,500. Your employer can match over and above that amount up to $58,000 or 100% of your salary, whichever is less in 2021. Another important point to talk about when it comes to your 401(k) match is that it’s always in pre-tax dollars. So what this means is that if you yourself are contributing to your 401(k), and you’re contributing to your Roth 401(k) or after-tax dollars, anything your employer contributes is going to be kind of like in a separate account, in pre-tax dollars. So if you were to ever roll your 401(k), your contribution would go into your Roth IRA, and your employer contribution would go into your Traditional IRA.
And then the last point we want to talk about when it comes to 401(k) matches is paying attention to vesting schedules which I’m going to talk about in another video, but essentially it’s important to know this incase you were to ever separate service or leave your employer so you know how much of that money will actually go with you.
That is today’s DueNorth Insight.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.