Many companies offer a 401(k) to their employees, and a lot of them also offer company matching as an extra benefit. A 401(k) company match is money your employer contributes to your retirement account, usually based on your own contributions and capped at a certain percentage of your income.
Here's a closer look at how 401(k) company matching works and how much you and your employer can contribute to your 401(k) each year.
How a 401(k) match works
Employees usually contribute a percentage of their salaries to their 401(k)s, and most employers who offer matching also contribute a percentage of employees' income.
Some companies offer dollar-for-dollar matches, which means the employer contributes $1 for every $1 the employee contributes to their 401(k). However, partial matching percentages are more common. This means the company matches a portion of what the employee contributes, such as $0.50 for every $1 the employee puts into their 401(k).
Regardless of the matching structure, your employer will likely cap your match at a certain percentage of your income. For example, your employer may pay $0.50 for every $1 you contribute up to 6% of your salary. So if you make $50,000 per year, 6% of your salary is $3,000. If you contribute that much to your 401(k), your employer contributes half the amount -- $1,500 of free money -- as a match. If the company offered a dollar-for-dollar match instead of a partial match, it would give you $3,000 for the year. You're free to contribute more than $3,000 if you want to, but you won't get any additional match from your company.
Companies often create a vesting schedule that determines when you get to keep employer-contributed funds if you leave the company. Immediate vesting means you get to keep all your employer's contributions to your 401(k) as soon as you earn them, but this is rare. It's more common to see cliff vesting, whereby you forfeit all your employer-matched funds if you leave the company before you've worked there a certain number of years. There's also graded vesting, whereby your company releases a portion of your match to you every year -- for example, 20% after the first year, 40% after the second year, and so on.
Every company has its own matching methodology and vesting schedule, so talk to your employer if you're not sure how your 401(k) match works.
Contribution limits
You are allowed to contribute up to $23,500 to your 401(k) in 2025 ($24,500 in 2026).
If you are 50 or over, you can make an additional catch-up contribution of $7,500 in 2025 or $8,000 in 2026, or if you are 60 to 63, you can make a catch-up contribution of $11,250 instead of $7,500 or $8,000.
The government also limits the total annual contributions to $70,000 in 2025 and $72,000 in 2026, not including the extra catch-up contribution. Most people don't have to worry about running into these contribution limits, but high earners should be mindful of them.
Related Retirement Topics
The government taxes contributions over the annual limit in the year you make the contribution and again when you withdraw the funds in retirement. Be aware of how close you are to the annual limits and withdraw any excess contributions before the tax deadline to avoid double taxation.
If you find yourself hitting the annual 401(k) contribution limit for the year and you'd still like to set aside more money for retirement, you can always open an IRA and put some money there as well.
A company 401(k) match is a great supplement to your personal contributions, but you need to understand how yours works to get the most out of it. Check with your employer to learn what type of matching system it uses, and then aim to get your full match while being mindful of annual contribution limits.
FAQs About 401(k) Company Match
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