How much does an employer match help?

Read time: 2 to 3 minutes

If your employer offers matching contributions, make sure you’re taking full advantage of them. They’re too good to pass up. Here’s why a match is so important.

It’s like an instant return on your money

Many plans offer matching contributions of 50 cents on the dollar—or even dollar for dollar—up to a certain percentage of your pay.

Where else can you get a guaranteed return of more than 50% on an investment? Nowhere.

Why would anyone turn it down?

The match is free money. If your employer offers a match, make sure you’re not missing out.

Your vested balance is yours, no matter what

The money you contribute to the plan is yours—and yours alone—from day one.

Any matching contributions from your employer, and their associated earnings, usually become yours over time in a process called vesting.

How quickly employer contributions—and their earnings—become your property depends on your plan’s rules. Just remember that if you leave your employer before you’re fully vested, you’ll give up the unvested portion of your matching contributions.

To review your plan’s vesting schedule, log in to your account at vanguard.com/retirementplans.

Get the full benefit of your employer match

As an example,* Alex and Sam started working for the same company on the same day. Each earned $50,000 a year and qualified for an employer match of $1 for every $1 saved for retirement, up to 6% of their pay.

But there was one big difference. Alex saved 2% in the retirement plan, missing out on some matching contributions. On the other hand, Sam saved 6% and got the full employer match.

Thirty years later, Sam retired with an account balance about three times higher than Alex’s.

*This example is hypothetical and does not reflect the return on any actual investment and the rate is not guaranteed. The final account balances assume a 6% average annual return and do not reflect any taxes or penalties that may be due upon distribution. Withdrawals from a tax-deferred investment before age 59½ are subject to a 10% federal penalty tax unless an exception applies.