Retirement Planning: Taking Advantage of Matching Contributions
By L. Sampson
Many companies offer matching contributions for your retirement plan. Are you taking full advantage of this opportunity to maximize your retirement account growth?
A matching contribution is one that your company matches and invests in your company retirement account. When managing you money in preparation for retirement, it is a good idea to take full advantage of the matching contribution if your workplace offers the option.
Contributing the full amount allowed
Most companies will not just contribute any amount to your retirement plan. However, most have some sort of provision, such as matching up to three percent of your income. So, if you get paid $2,500 twice a month, and the matching is three percent, the company will match your contribution, up to $75 per paycheck. This means that you should contribute the full $75 (or more) each time you are paid so that you can maximize your free money. Remember, the company’s match does not come out of your paycheck; it is a “bonus” benefit provided by the company. According to the example above, you would have $300 a month placed in your retirement investment plan — $150 from your contribution and $150 from the company.
Automatic paycheck withdrawal
Having your contribution amount automatically deducted from your paycheck is a good idea. That way, you never “see” the money, and so are not tempted to spend it. Sign up for your company’s matching contribution retirement plan as soon as you are eligible so that you won’t “miss” the money when it is gone. Having the money taken out of your paycheck has another benefit if you have a traditional 401(k): it is pre-tax, so you save money each year in income taxes.
A matching contribution can help you grow your retirement account and maximize your earnings. If your company offers it, sign up and get the most out it.
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