Aside from medical insurance, 401k plans are one of the best benefits an employer can offer their employees. 401k plans offer employees a way to save up for their retirement with tax-deferred contributions. Additionally, if the employee has to file for bankruptcy, the 401k money is protected from creditors staking their financial claims against their losses. To sweeten the deal even more, many employers actually match their employee’s contribution to their 401k plans, thus providing them with additional monetary perks to their job.
Employer Contributions
Legally, employers can make matching contributions up to 6% of an employee’s pretax salary. Depending on your earnings, that can be quite a large financial incentive to help encourage you to take advantage of the 401k plan provided by your employer.
Please note, just because the law dictates the maximum limit a company can match to their employee’s 401k plan, does not mean that they have to make that selection. How your company will match (dollar for dollar or a portion to a dollar to a maximum cap) is entirely up to them and you should review your company’s benefit manual to see exactly how much they are willing to contribute to your match so you can best decide on your contribution strategy.
Max Contributions
Financial experts often encourage employees to contribute the maximum amount they can to their 401k plan to take advantage of all the benefits that are provided by the Government. At the very least, employees should opt to make the minimum contribution to take advantage of the maximum amount your employer will offer you as a match. Remember, if you do not you are literally walking away from money your employer will give you on top of your annual salary.
