How To Win With Your Employer’s Retirement Plan

As you’re working to build your Freedom Generator, are you overlooking a secret source of money? A way that you can possibly double the amount of money you’re able to invest in your future… all without breaking a sweat?

Not only is this possible, but your employer, of all people, wants to make it happen. In fact, your job’s employer-sponsored retirement plan is an incredible way to beef up your Growth Engine and accelerate your Freedom… if you do it right. Here’s how:

Alert: Free Money

employers retirement planGot a 401(k), a 403(b), a Roth 401(k) or some other similar retirement account that’s offered by your employer? There are any number of names for all the employer-sponsored retirement plans out there. For the sake of simplicity though, though we’ll refer to your plan here simply as a 401(k). But, keep in mind that the concepts we’ll discuss generally apply to most company plans that you may be offered.

These days, if you put your money in a savings account, you’re probably seeing an APR of about 1%. If you invest your money into income-generating stocks, you’re doing well if your annual return is around 5%.

And, if you put your money into one of the accounts in your Growth Engine bucket, getting a return of 8% or more is pretty sweet.

But what if I told you that there’s somewhere you could get a guaranteed, 50% or 100% return on your money? There is! If your employer offers a matching contribution when you contribute to your 401(k), that’s exactly what you receive. A 401(k) matching program is specific to each employer but typically has one of these two formats:


  • Your employer will match 50% of your 401(k) contributions up to X% of your annual salary. In this scenario, your employer will give you $0.50 for every dollar you put down up to the specified cap.
  • Your employer will match 100% of your 401(k) contributions up to Y% of your annual salary. In this scenario, your employer will actually give you a dollar for every dollar you put down up to the specified cap.

That is completely free money. And it’s a money-making deal you can’t afford to pass up. The only conditions for keeping the cash usually involve your staying with the company until you’re fully vested—generally three to five years—and doing your investing directly in your employer’s 401(k).

Get The Most For Your Money

employers retirement planWith an employer-sponsored retirement plan that includes a company matching program, you’re already getting free money that you could never be guaranteed in a savings account, stock fund or other investment vehicle. But it’s possible to sweeten the deal even further:

  1. Always contribute the max. If your employer will match up to 6% of your salary, don’t contribute just 1% and leave the rest of that free cash just lying on the table. Put in the full 6%.
  2. But don’t contribute more than the max. Your 401(k) might have some nice choices for investments, but you’re probably limited to a few dozen funds. That means you’re stuck with just those options—including whatever high fees they might have or so-so returns they offer. Since no one will match your contribution above the company-specified max, put any extra money you want to invest in this way into an IRA, Roth IRA or traditional investment account. With those types, you have more control and many more investment options.
  3. Think of your 401(k) as part of your larger portfolio. In your portfolio, you probably want to invest in some large stocks, foreign stocks, bonds and more. But what if the available foreign stocks and bond funds in your company’s 401(k) aren’t so hot? While your portfolio as a whole has to be diversified, there’s no rule that says your 401(k) itself must be. So beef up on the awesome large-cap stocks in your 401(k), and use your IRA or Roth IRA to hold the additional investments you need to be perfectly balanced and diversified.

Enhance Your Freedom Plan

Your Growth Engine is a critical part of your Freedom Generator. It offers you a way to take on risk beyond what you can handle in your Income Generator in order to achieve incredible monetary growth over a long period of time. And more money going into your Growth Engine right now translates to that much more cash you can pull out down the road.

So integrate a 401(k) with a company match into your Freedom plan. When your Income Generator is ready to fund your Freedom, you’ll feel confident your Growth Engine will provide the extra you need to live life fully.

Community Question: Do you participate in your employer’s retirement plan with a match? How does participating in that program support your Freedom journey? Let us know in the Financial Foundations community!


image credit: Bigstock/ribkhan


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There is 1 comment

  • Marc Jolivet on November 28, 2017 at 12:52 pm

    How it going Doc? Good article, simple and to the point. Have you done similar research for these type of savings on the Australian Superannuation market.

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