We all want to maximize our money coming in each week. With our jobs and savings, we have more options now than ever to increase profits. Savings accounts accrue interest and our employers supply 401k programs.
But did you know that most employers also have a 401k match program? A 401k is a great way to plan for retirement. Since many employers now offer a match program, growing your retirement fund has never been easier.
A 401k match program is essentially free money. Every time you put money into your 401k, your employer puts money into the account as well.
How To Start A 401k Match Program
Not all employers will offer a 401k match program. But it is never a bad thing to reach out to HR and ask if they do. Ask your employer what options they have available for your 401k.
Some employers will offer a full 100% match, while others offer a 50% match. Depending on the company, you may be able to work up to a 100% match after a few years of employment.
Are There Limits To The Programs?
The most simplified answer to this is, yes. There are limits on 401k match programs depending on the rules set by your employer. No two companies are exactly the same, so your new employer may differ completely from your old employer.
Most employers match up to a certain percentage of your income. For example, let’s say your employer will match 100% of 4% of your income, and you contribute 5% to your 401k. Your total amount contributed would be 9%.
On the other hand, let’s say that your employer will match 50% of 3 percent of your income, and you contribute 1% to your 401k. Your total amount would be 1.5%.
The higher amount you put into your 401k, the higher the match will be. It is always best to put in at least the minimum percent of what they are willing to match. If they match 5%, you should put in 5%. Anything less is essentially losing money that could be offered.
Are Their Caps On My 401k Investment
Yes, there is a cap on your investment. The only drawback to a 401k in my opinion is the limits set on how much you can earn each year.
For 2022, the maximum amount you can contribute is $20,500 for the year. If your employer has a 401k match program, the limit increases to $61,000. If you want to save more money for your retirement you may want to consider an IRA account.
Don’t Exceed Your Limits
Since there are limits on how much you can contribute to your 401k each year, you have to be aware of how much is going into the account. You do not want to exceed your allowed amount because you may be taxed twice on the amount earned. Reach out to HR before tax day to fix the issue and avoid double taxation.