How to Maximize Employer 401k Contributions
- 1). Contact your human resources department or the recordkeeper of your 401k account to ask how much you can receive as the maximum in employer 401k contributions. For example, your employer may match 50 percent up to the first 6 percent of pay you contribute. If your income is $40,000 a year and you give 6 percent of your income all year before taxes, that is $2,400. If your employer gives 50 percent of that, they will put another $1,200 of free money in your 401k. Therefore, it is best to maximize this scenario by giving at least 6 percent of your income if possible.
- 2). Ask how to start making contributions. You may have a required length of employment before you can contribute or qualify for employer 401k contributions. You may be able to authorize your request by phone, or you may need to complete a form. You may also need to wait until the next enrollment period. You will need to discuss this with your human resources department to find out how to begin your contributions so you can start receiving that free money.
- 3). Ask your employer or recordkeeper about the rules regarding the vesting of your employer 401k contributions. "Vesting" is how much of the employer contributions you are entitled to once you terminate your employment with the company. For example, your employer may require that you work with them at least five years before you will be entitled to keep 100 percent of the employer contributions in your account. If your employment is terminated too early, you may be entitled to none or only part of the employer 401k contributions in your account.