401k Match

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You may not be the only one contributing to your 401(k) plan, thanks to employer matches.

What does that mean? Simply that your employer might match part or all of your 401(k) plan contributions. For example, your employer might match 100% of the first 4% you contribute and 50% of the second 2% you contribute.

That can really add up. Let’s say you make $100,000 pear year and contribute 10% to your 401(k) plan. That makes your annual contribution is $10,000. Your employer matches your first 4% dollar-for-dollar, contributing $4,000. It matches your next 2 percent 50 cents on the dollar, contributing $1,000. You end up with $15,000 in your account—$5,000 more than you contributed!

Keep in mind that your employer’s contributions may not be vested for a certain number of years. In other words, they’ll be in your account, growing. But, if you leave the company within a specified time, you can’t take them with you.

Finally, there are limits as to how much your employer can contribute to your plan. Employer contributions can’t exceed 6 percent of your salary. And, the total employer and employee contributions can’t exceed the lesser or 100% of your salary or some other arbitrary amount. That amount is $46,000 in 2008, but will be adjusted for inflation thereafter.

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