401(k) Employer Match — How It Works and Why You Shouldn't Leave Money Behind
About 1 in 5 workers who have access to an employer 401(k) match don't contribute enough to get the full match. That's the equivalent of turning down a raise — sometimes worth thousands of dollars a year.
See how much your employer match adds to your retirement with the 401(k) Calculator→How Employer Matching Works
Your employer promises to contribute money to your 401(k) based on how much you contribute. The match is essentially bonus compensation — you just have to put in your own money first.
Common Match Formulas
| Match Formula | What It Means | Your Contribution on $80k Salary | Employer Puts In |
|---|---|---|---|
| 100% of first 3% | Dollar-for-dollar up to 3% of salary | $2,400 (3%) | $2,400 |
| 50% of first 6% | 50 cents per dollar up to 6% | $4,800 (6%) | $2,400 |
| 100% of first 6% | Dollar-for-dollar up to 6% | $4,800 (6%) | $4,800 |
| 100% of first 4% | Dollar-for-dollar up to 4% | $3,200 (4%) | $3,200 |
| $1 for $1 up to $5,000 | Fixed dollar cap | $5,000+ | $5,000 |
The most common formula is 50% of the first 6% — meaning you need to contribute at least 6% of your salary to get the full match.
The Real Cost of Not Getting the Full Match
If your employer offers 50% match on the first 6% and you earn $80,000:
| Your Contribution | Employer Match | Total Annual | Match You're Missing |
|---|---|---|---|
| 0% ($0) | $0 | $0 | $2,400 |
| 3% ($2,400) | $1,200 | $3,600 | $1,200 |
| 6% ($4,800) | $2,400 | $7,200 | $0 |
| 10% ($8,000) | $2,400 | $10,400 | $0 |
Contributing only 3% instead of 6% costs you $1,200/year. Over 30 years at 7% growth, that missed match compounds to roughly $113,000.
See how much your employer match is worth over time→Match on Pre-Tax vs Roth Contributions
Whether you contribute to a Traditional or Roth 401(k), the employer match goes into the Traditional (pre-tax) side of your account. This is true even if all your own contributions are Roth.
Starting in 2026, some employers may offer Roth matching contributions (SECURE 2.0 provision), but most haven't adopted this yet.
Vesting: When the Match Is Actually Yours
Just because employer match money is in your account doesn't mean you can keep it if you leave. Vesting determines how much of the employer match you own based on your tenure.
Common Vesting Schedules
Cliff Vesting — 0% until a specific date, then 100%:
| Years of Service | Vested % |
|---|---|
| 0-2 years | 0% |
| 3+ years | 100% |
Graded Vesting — gradual increase:
| Years of Service | Vested % |
|---|---|
| 1 year | 0% |
| 2 years | 20% |
| 3 years | 40% |
| 4 years | 60% |
| 5 years | 80% |
| 6+ years | 100% |
Your own contributions are always 100% vested. Vesting only applies to employer contributions.
What Happens to Unvested Money?
If you leave before fully vesting, the unvested portion goes back to the employer (called a "forfeiture"). For example, with 3 years of service under graded vesting, you'd keep 40% of the employer match and forfeit 60%.
Strategies to Maximize Your Match
1. Contribute at Least Enough to Get the Full Match
This is the absolute minimum. If the match formula is "50% of first 6%," contribute at least 6%. Anything less is leaving free money on the table.
2. Watch for the "True-Up" Provision
Some employers match each paycheck individually. If you max out your $23,500 limit early in the year, your later paychecks have $0 contributions — and $0 match.
Example (no true-up):
- Salary: $100,000, paid biweekly
- You contribute $23,500 in the first 20 paychecks (by October)
- Last 6 paychecks: $0 contribution → $0 match
- You lose 6 paychecks of employer match
With true-up: The employer calculates your annual match at year-end and contributes any shortfall. Ask HR if your plan has this.
Without true-up: Spread contributions evenly across all paychecks to maximize the match every pay period.
3. Don't Confuse Match with Vesting
A generous match formula means nothing if you leave before vesting. Factor vesting into job-change decisions — a few extra months could mean thousands in vested match.
4. Check If Bonuses Are Match-Eligible
Some plans exclude bonuses from match calculations. If your bonus is $10,000 and you contribute 6% from it ($600), the employer might not match that $600. Verify with HR.
Employer Match Is Not Taxable (Yet)
Employer match contributions are not included in your taxable income for the year. You won't owe tax until you withdraw the money in retirement (at ordinary income rates).
This makes the match even more valuable — it's pre-tax growth with zero current tax impact.
Match Limits
Employer match does not count toward your $23,500 employee contribution limit. It counts toward the $70,000 total annual limit (employee + employer combined).
| Component | 2026 Limit |
|---|---|
| Employee contribution | $23,500 |
| Employer match | No separate cap |
| Combined total | $70,000 |
FAQ
What if I can't afford to contribute 6%?
Start with whatever you can — even 1% is better than 0%. Many employers let you set up automatic increases (1% per year) so you gradually reach the match threshold without feeling the pinch.
Does the match apply to Roth 401(k) contributions?
Yes. You get the same match whether you contribute Traditional or Roth. The match itself goes into the Traditional side of your account.
Can my employer change the match formula?
Yes, employers can modify or suspend matching at any time. Some reduce matches during downturns. Check your plan documents for the current formula.
Is employer match included in the $23,500 limit?
No. The $23,500 limit is for your contributions only. Employer match counts toward the $70,000 total limit. See 401(k) Contribution Limits 2026 for all limits.
What happens to my match if I'm fired?
Same vesting rules apply regardless of whether you quit or are fired. Your vested match stays; unvested match is forfeited.
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