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Retirement Planning: Should Your 401K Match be Part of Your Savings Goal

retirement planning


As you are setting up your retirement plan there are many decisions that need to be made that will end up impacting your net worth.  Deciding if you should count your companies 401K match as part of your saving goal is one of those decisions that can make a significant difference in the success of your retirement plan.

In order to make this decision you will need to understand more about your companies match program, your own financial circumstances and your retirement plans.

Understand Your Company Match

The very first thing that you need to do is understand what you are getting from your 401K company match.  Following are some items that you should take into consideration:

  • Vesting Schedule: When will you be vested in the money?  If your goal is to save 15% of your income for retirement and you use the match towards that goal, but then leave the company without being vested you will lose that money and thus have missed out on your savings goal.  If you are not vested the money is not yours.
  • What is the percentage match – knowing how much you are talking about can help you decide if it is even worth worrying about.  If the match is 1% then it might not be as big of a decision as a company that is matching 7%.
  • Where do the funds go – if your company match is all going into company stock then it might be wise to not count the match as it won’t be diversified and brings extra risk to your overall situation.  On the other had if it is going to the funds you selected it carries less risk and you may want to count the match.

Understanding Your Financial Situation

By not understanding where you stand with your money you cannot make an educated decision.  Some things to consider:

  • What is your target retirement savings?  Most people recommend between 10 – 15% of your income.  If you don’t know what your goal is then you really don’t have a decision to make!  Start by figuring out how much you will need in retirement.  Know where you want to go and then decide what roads you are going to take to get there.
  • Do you have other issues you need to clean up with your money?  There is more to saving for retirement beyond just your investments.  If you have excessive debt or other issues that can eat up your investments during retirement, then you still did not reach your goal.  If your goal is 15%, but right now you do 12% and count the 3% match while you then put the extra money you have towards your debt it will help you accomplish the ultimate goal of financial stability.  Then once you have your debts paid off then you can add the extra money to retirement or fund other needs such as college for the kids.
  • If the match goes away do you have the funds to increase your savings to your target savings rate?  A match is not guaranteed, so if you leave the company or the company takes away the match then are you able to make up the difference in order to reach your goal.  If you cannot then it will end up putting you further behind in achieving your goals.  Don’t fall into the trap of counting on the match to meet your retirement goals while your budget might not be on track.
  • Do you prefer to have a cushion?  If you prefer to minimize risk any way that you can, then you might want to consider the match a cushion for your 401K.  This way it can weather the storm of high fees, bad market performance or your retirement expenses being larger than you expected.


Once you gather all the information that you need it is time to make a decision.  However, don’t make this a one and done decision – come back to it once in a while and evaluate if things are still the same.  As our life and finances change, our plans also need to change.  (Click Here to Tweet This Quote)

Opinions of Other Personal Finance Bloggers:

I wanted to share with you some opinions of others so you could get a feel for what others are thinking.

ME:  I don’t count the match as part of my target savings because we are not vested, but I do track my savings rate for both our contributions and for the combined amount.  This way I can understand what I am contributing plus the overall picture of my savings if it does vest.  I feel this gives me a better idea of what is going on and the right information to deal with life’s financial ups and downs.

Andrea Amir: “You know what is interesting. When I had an employer 401K I did count it as part of my 10%. Now that I am self employed and if I went back to work with a 401K, I wouldn’t include it at all.”

Latisha D. Styles: “No. I consider that free money and a cushion against market changes. Plus it’s a 5 year vesting schedule so who knows where I’ll be in 5 years. I may not even get the full amount.”

Kyle Bumpas: “I don’t count it until it’s 100% vested, but after that, yes I count it. Money is money.”

Budgets are Sexy: “If the money is a DEFINITE and in my 401(k) account, then yeah – I include it in my net worth calculations. If not, then no. I only count on the assets that’s 100% mine and in my hands.”

Kelly Whalen: “We do since my husband’s plan is rock solid and it vests immediately.”

Kay Bell: “I’m self-employed, but my husband has a 401(k) at his job. We count only his percentage contribution. The employer match is just gravy.”

Your Turn: I would love to hear what you decided and why, please comment below!


Roger @ The Chicago Financial Planner says November 27, 2012

Great post Andrea, a clear, concise explanation of what isn’t as simple of a topic as it might appear to be. Excellent points also about incorporating your personal situation into the equation.

    Andrea says November 27, 2012

    Thank you Roger!

Linsey K says November 28, 2012

This is great info! I only wish I had employer match. (One of the downsides of being self-employed, I guess?)

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