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Employer Matching: It Really Adds Up
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Some employers will match a certain percentage of the contributions you make to your retirement account. How important is the employer match? Well, over many years, a match can make the difference between having just enough to scrape by and living comfortably in retirement.
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For example, let's say you are contributing $1,800 each year to a DC plan that grows at a rate of 7% annually. After 30 years you'd have more than $175,000. Not bad. But look at what happens with an employer match: if you contributed the same amount ($1,800) each year, received an employer match of 50% (for a total of $2,700 a year), and got the same 7% return, you'd have more than $263,000 after 30 years. That's $88,000 extra to enjoy in retirement–absolutely free.
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Not all plans have employer matching contributions, but if yours does, you should take advantage of this benefit by contributing at least enough to earn the full match. Otherwise, you are turning down free money.
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