Company Match
Company match summary:
Some employers offer a company retirement plan, such as a 401(k).
Your employer might also match your contributions to the account.
If you have the chance to get a company match in your 401(k), it’s free money.
Company match definition and meaning
A company match is money your employer puts into your retirement account if you also contribute the same amount. For example, if your company has a 3% match, you would contribute 3% of your salary, and your employer would contribute the same amount. This means you’d be saving 6% of your salary toward retirement. Your contribution comes out of your earnings, sometimes pre-tax (for a traditional retirement account, the money you put in and any investment gains will be taxable in retirement). The company match comes out of your employer’s pocket.
If your employer offers a retirement plan, such as a 401(k), you may be eligible for a company match to the funds you contribute. The details vary based on the employer’s plan, but if your company is willing to match part of the money you put into the retirement plan, you’re getting free money.
Over time, the value of your 401(k) account is expected to increase. That's because investments typically increase in value over time, giving you more financial security in your retirement years. Investing is a way to manage your money for financial success. (Investments aren’t guaranteed to increase. Talk to a registered investment adviser about your own retirement plans.)
Key concept: A company match is free money, and it could help you reach your retirement goals faster.
More on company match
Over time, the money in your 401(k) account will likely increase. That's because investments typically increase in value, giving you more security in your retirement years. Investing could help you find financial success. A match helps you grow your money faster.
Key components of company match
Getting a company match on your retirement plan contributions is fairly simple, but here are a few things to know.
You only get a match within a company plan
If you have an individual IRA, it can’t be used to receive a company match. The only way to get a company match is to enroll in your employer’s 401(k) plan and make the required minimum contributions. You might also be eligible for a company match if you work for a small business that offers a SIMPLE IRA with matching contributions.
A company match doesn’t count against your contribution limits
The IRS limits how much you can contribute to your company retirement account each year, but a company match doesn’t count against that annual limit. If you’re under 50, you can contribute up to $23,500 per year in 2025. If you’re over 50, you can contribute an additional $7,500 for a total of $31,000. Any money your employer matches simply raises the total contribution for that year.
You may have to work for the company for a set time
Some employers offer immediate vesting, meaning the company match is 100% yours as soon as it's contributed. Other employers have a vesting system. If you leave the company before a certain number of years, you’ll lose out on some or all of the company match.
The longest a company can make you wait to be fully vested in 401(k) matching contributions is six years.
The match grows tax-free while the money is in your account
Just like your own contributions to the retirement plan, your company match also grows tax-free while it’s invested. You’ll only pay taxes on an employer match in your traditional 401(k) when you withdraw the money.
Company match: a real-life example
Riley just got a new job, and one of the benefits is a company match to the retirement plan. The employer will match half of Riley’s contributions up to 6% of her salary. Riley’s salary is $80,000 a year, and she needs to contribute 6% to get the full company match.
Riley will have to contribute $400 a month—$4,800 per year—to get the full match the company offers. Since the money is taken from Riley’s paycheck before taxes are deducted, Riley’s tax burden is lower. It’s similar to getting a discount on the contribution. The company’s 3% match adds $2,400. Contributing 6% of her salary gives Riley a total of $7,200 to invest every year.
Company Match FAQs
Can my retirement savings be my emergency fund?
No, your emergency fund should be liquid. Liquid means equivalent to cash. Don’t rely on retirement savings for emergencies until you are of retirement age and can make withdrawals without penalty. If you have a 401(k) at work, then you may have the option of borrowing against it to cover an emergency. You could also withdraw money from an IRA if you have one. But you could get hit with substantial tax penalties, which would diminish the value of your account.
What happens to your 401(k) if you quit your job?
If you separate from your employer, you have a few options. You could leave the money where it is, depending on the account balance. If your account has under $5,000, the plan has the option of forcing you into an IRA. If this is the case, you could choose your own IRA to receive the assets. If available, you could roll your account over to a new employer’s 401(k). You could simply take the cash, but this is not a good idea. If you’re under 59 1/2, you’ll pay income taxes and an early withdrawal penalty. Worse, you’ll lose the potential growth on your money for your retirement years.
Do you lose your 401(k) if you get fired?
Even if you’re fired, your 401(k) contributions remain yours. And if you’ve been with your employer long enough to be vested, you get to keep the company match too.
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