Step 6: Get Your Employer Match for Retirement
Phase 2: Build a Routine · Step 6 of 12
Free money first.
In short
If your employer matches retirement contributions, put in exactly enough to get the full match. A match is an instant 50% to 100% return. Free beats tax-free, and tax-free beats tax-deferred.
Why this comes now
Defense comes before offense. Earlier, investing would have meant earning maybe 7% while paying 20% on a credit card. Now your budget runs a surplus, a month of expenses is saved, high-interest debt is gone and your family is protected. The match is the one investment too good to wait for.
How to do it
- Find your plan's match formula on the benefits site or by asking HR.
- Set your contribution to the percentage that captures the full match, and no more for now.
- Choose Roth if your plan offers it: you pay the tax now and take it out tax-free later.
- Pick low-cost index funds. The Primer on Investing explains how.
- Redo your Undetailed Budget with your new, smaller take-home pay.
Example Family: Alex and Jordan
Alex's 401(k) matches up to 6% of pay, so Alex puts in 6%. Jordan's 403(b) matches up to 4%, so Jordan puts in 4%. Both choose Roth. Take-home pay drops to $4,600 a month, leaving a $600 surplus.
Examples are hypothetical.
You're done when
Each of you contributes enough to get the full employer match, and your Undetailed Budget reflects the new take-home pay.
Your next step
For education only. Not individual financial, tax or legal advice. Talk to a tax pro or attorney about your situation.