What This Article Answers
This article shows how employer matching affects total retirement outcomes and why it dominates most other optimizations.
Assumptions
- Salary: $100,000
- Employee contribution: 6%
- Employer match: 100% of first 3%
- Annual return: 7%
- Time horizon: 30 years
The Outcome
Employer matching increases the final balance by over $400,000 with no additional employee cost.
Breakdown
| Scenario | Total Contributed | Ending Balance |
|---|---|---|
| No match | $180,000 | ~$680,000 |
| With match | $270,000 | ~$1,090,000 |
Why This Happens
Employer contributions compound just like employee dollars. Matching effectively raises your savings rate without reducing take-home pay.
Variations to Consider
- Partial matches
- Vesting schedules
- Higher contribution rates
- Early job changes
Key Takeaways
- Employer match is immediate return
- Skipping match is extremely costly
- Matches matter more than fund selection