Our Recommendation
Your employer offers a 50% match on contributions up to 6% of salary. An optimized profile contributes at least 6% to capture the full match. This is the single highest-return 'investment' available to you—an instant 50% return before any market gains.
Why This Matters
Employer matching is guaranteed free money. Not capturing the full match means leaving significant value on the table. For someone earning $80,000, the full match is worth $2,400/year. Over a career, this compounds to tens of thousands of dollars.
Understanding the Basics
A 401(k) is a tax-advantaged retirement account. Contributions reduce your taxable income now, grow tax-deferred, and are taxed at withdrawal in retirement. The 2026 contribution limit is $24,000 (plus catch-up contributions for those 50+). Your employer's matching policy is one of the most valuable benefits offered.
5-10 Year Impact
- At 7% annual returns, $2,400/year for 20 years grows to ~$100,000
- The earlier you start maximizing, the more compound growth works in your favor
- Full match capture ensures you're building retirement wealth efficiently
- Reduces the risk of being underprepared for retirement
This Year
- Contributing 6% of an $80,000 salary means $4,800/year ($400/month) from your paycheck
- However, tax savings reduce the actual impact—your take-home may only drop ~$280/month
- Review your budget to ensure this is sustainable for your situation
- You can adjust contribution levels at any time if circumstances change
If You Don't Act
- Each year without full match capture loses $2,400+ permanently
- The opportunity cost compounds—early missed matches have the biggest long-term impact
- No other investment offers a guaranteed 50% return
Things to Consider
- Reduced monthly cash flow requires budgeting
- Funds are generally locked until age 59½
- Investment returns depend on market performance (though match is guaranteed)
Alternative Options
Contribute less than 6%
- More take-home pay now
- Easier to start
- Miss out on free employer money
- Suboptimal long-term outcome
Unless you have high-interest debt (>7-8%) or no emergency fund, capturing the full match should be priority #1.
Contribute more than 6%
- More retirement savings
- More tax deferral
- No additional match above 6%
- May impact other financial goals
After capturing the full match, consider maxing HSA first due to its triple tax advantage. Then return to additional 401(k) contributions.
Your Action Plan
Review your current 401(k) contribution percentage
Calculate what 6% of your salary equals monthly
Update contribution to at least 6% via HR portal
Set calendar reminder to review contribution annually
Financial Impact Analysis
Annual Benefit
$2,400
10-Year Projection
$38,500
How We Calculated This
Based on $80,000 salary assumption: 6% contribution = $4,800, 50% employer match = $2,400 in free money annually.
Key Assumptions
- •Salary of approximately $80,000 (adjust based on your actual salary)
- •Employer match policy of 50% up to 6% continues
- •You remain with this employer