This is a sponsored post from Bank of Sun Prairie. It was not written by the Madison Minutes news team.
Some employers match retirement contributions made by employees. Your employer’s 401(k) match plan helps your investment grow, so you can retire comfortably and realize your post-employment dreams.
Understanding your plan’s terms and benefits is essential to maximize your savings and earning potential. Use the following information and tips to help your 401(k) employer match work for you in 2023.
How 401(k) Employer Matching Normally Works
With a traditional 401(k), you automatically contribute a percentage of your pre-tax salary. Employers offering a 401(k) match will match your contribution up to a certain amount.
Some businesses offer a whole match, and others provide a partial match. Regardless of the percentage, an employer match is free money to fund your retirement.
Tips to Maximize Earnings
Follow these tips to maximize your earning potential:
- Join your employer’s plan. In 2020, over 67% of private industry workers had access to an employer retirement plan, according to the U.S. Bureau of Labor Statistics. Retirement savings are critical to your future, so take advantage of this benefit.
- Start saving early. Depending on your age, retirement might seem far away, but it’s important to prepare. The sooner you start saving, the more time your money has to accumulate and grow. If you are just starting your job, join a plan as early as your company allows—some companies require you to work for a certain amount of time before enrolling in their 401(k).
- Contribute enough to get your employer’s match. If your employer offers a 100% match for up to 5% of your salary, and you contribute only 3%, you are losing an additional 2% that your company is willing to give.
- Save beyond the company match, if possible. Always save as much money as possible for retirement, regardless of your employer’s match. The more you set aside now, the more financially secure you’ll be in the future.
- Be mindful of annual contribution limits. The IRS will publish 2023 limits of what you and your employer can deposit in your 401(k). If you exceed the limits, the IRS will tax you for the year you contribute and when you withdraw funds.
- Avoid early withdrawals. Avoid taking money out of your 401(k) so it has time to grow. The IRS also assesses a significant early withdrawal penalty if you are under age 59½.
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