401(k) – Part 2

Contributing to a 401(k)?

Does your company offer a 401(k) plan? Seek to receive the highest available match that your employer offers. A company representative can help you understand the specific amount offered by your firm. The maximum contribution is set by the IRS annually. In 2025, the limit is $23,500 or $31,000 for those over 50. Listen closely to this example from Fidelity. Suppose an employer matches 100% of your contributions up to 3%, plus 50% of your contributions on the next 2%. Under these rules, you would contribute at least 5% of your salary to get the full employer match.

If you earn $60,000 annually, the math looks like this: Your 5% of $60,000 equals an annual contribution of $3,000. The employer match is 3% of $60,000 which is $1,800. The remaining match is 2% of $60,000. That equals $1,200, which is divided by two, which equals $600. So, the $1800 plus $600 is $2,400 in free contributions paid by your employer when you contribute $3,000. Obviously, it may take time to maximize your annual contribution, but the benefit of receiving free money cannot be ignored. Starting early will significantly impact long-term rewards. Any retirement that has tax advantages also comes with serious complexities. I recommend that you seek the advice of a professional advisor as your account grows.

And if you need help getting on a savings plan, check out our budget coaching program. It can put you on the road to financial freedom. Go to crown.org and click on the “Get Help Now” tab. You can start today at crown.org.