Lesson 8 of 10

What is a 401(k) match? (The closest thing to free money)

A 401(k) is a retirement account through your job.

Many employers match what you put in. That's extra pay you only get if you save.

A common match: 50 cents for every dollar you put in, up to 6% of your pay.

Example: $50,000 salary, 50% match up to 6%

You put in (6%)$3,000

Your employer adds$1,500

Total in your account$4,500

Your money goes in before income tax. In the 12% bracket, that saves about $360 in federal tax, so your take-home only drops about $2,640.

Some matches take time to become fully yours. This is called vesting. Ask HR how yours works.

Key idea

Put in at least enough to get the full match. Skipping it is leaving part of your pay on the table.