This one simple move could seriously boost your savings.
With costs rising and retirement becoming more expensive than ever, it’s critical to make the most of all the tools in your toolbox to save as much as possible.
The 401(k) is a powerful way to save for retirement, and it offers some perks that you won’t find with other types of accounts. Taking full advantage of your 401(k) could help you save thousands more, and there’s one thing, in particular, that I wish everyone would do: Contribute enough to earn the full employer match.
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Boost your savings by hundreds of thousands of dollars
Many 401(k) plans off employer matching contributions, which is essentially free money.
Each plan differs when it comes to how much you could receive, but among Vanguard 401(k) plans, the most common type of match is 50% of an employee’s contributions up to 6% of their wages, according to Vanguard’s 2024 How America Saves report.
For some workers, the employer match alone could add up to hundreds of thousands of dollars over time. Say, for example, you’re earning $60,000 per year — which is roughly the median earnings among U.S. workers, according to 2023 data from the Bureau of Labor Statistics.
If your employer will match 50% of your contributions up to 6% of your salary, that would amount to $1,800 per year. Let’s also say you’re earning a 10% average annual return on your investments, which is in line with the stock market’s historic average return. At that rate, here’s approximately how that $1,800 per year would add up over time:
| Number of Years | Total Savings |
|---|---|
| 20 | $103,000 |
| 25 | $177,000 |
| 30 | $296,000 |
| 35 | $488,000 |
| 40 | $797,000 |
Data source: Author’s calculations via investor.gov.
Remember, too, that these calculations are only accounting for the employer match itself. Once you factor in your own contributions, you’ll have at least double these numbers.
Also, most people experience salary increases throughout their career. Because the employer match is generally a percentage of your wages, as your earnings increase, so will the amount you collect from your 401(k) match. Depending on how much you’re earning throughout your career, you could potentially earn $1 million or more just in employer matching contributions.
What if you can’t afford to save right now?
Times are tough for millions of Americans, and many are barely scraping by just trying to pay the bills. If that’s you, you’re not alone. But saving anything at all — even if it doesn’t seem like much — is better than nothing.
For example, maybe you can only save $20 per month in your 401(k). Throw in the $20 monthly employer match, and assuming you’re earning a 10% average annual return on your investments, that would add up to nearly $80,000 after 30 years.
Time is the most valuable resource you have when saving for retirement, so it pays to invest whatever you can afford right now — even if it doesn’t seem like it would make a difference. And if you truly can’t afford to save anything at the moment, that’s also OK. As soon as you’re in a place financially to invest, take full advantage of all the perks you have to maximize your savings.
The 401(k) is an incredible savings-boosting tool, and the employer match can take your retirement fund to new levels. By contributing as much as you can to make the most of your match, you could save hundreds of thousands of dollars more with next to no effort.