Your 401(k) match is a raise you have to go claim

Open your benefits portal tonight and find two numbers. The first is your current contribution rate as a percentage of pay. The second is your employer's match formula, which lives in a PDF called the Summary Plan Description and runs about forty pages, most of them dull. You need one paragraph of it.

If those two numbers don't line up, you're working for less than your employer agreed to pay you. Not metaphorically. The company budgeted that money for you, wrote it into the plan document, and you didn't take it.

That's the whole problem in three sentences. The rest of this is how the machinery works and where it jams.

Find the formula, not the headline

HR emails say things like "we match up to 6%." That sentence is useless, because it hides whether they match dollar for dollar or fifty cents on the dollar, and those are very different jobs.

Two common shapes you'll see:

• 100% of the first 3%, then 50% of the next 2%. Contribute 5% of pay and the company adds 4%. This is the classic safe harbor enhanced match.
• 50% of the first 6%. Contribute 6% and the company adds 3%.

Illustrative example, not a promise about your plan: on $80,000 of salary with the first formula, contributing 5% means you put in $4,000 and the employer adds $3,200. Contribute the auto-enrollment default of 3% instead and you put in $2,400 and the employer adds $2,400. You just left $800 in the company's pocket for the year because a software default was set conservatively and you never touched it.

Auto-enrollment was a genuinely good invention. It got millions of people saving who otherwise never filled out the form. But the default percentage is a starting line, not a target, and a lot of plans set it below the full match threshold. Some auto-escalate a point a year. Plenty don't.

The front-loading trap

This one gets ambitious savers, which is the annoying part. The people who lose the most here are the ones trying hardest.

Most plans calculate the match per pay period, not per year. You get matched on what you deferred in that specific paycheck. So if you push your deferral rate way up, hit the IRS annual elective deferral limit in August, and your contributions shut off for the rest of the year, your match shuts off too. Four months of match, gone, even though you contributed more than the guy who got all of his.

The fix is a plan provision called a true-up, where the employer runs the math again after year-end and cuts you a catch-up match for anything you missed. Some plans have it. Some don't. It's in the same document as the formula, usually under "Employer Contributions."

Two things to do about it. If your plan has a true-up, front-load all you want. If it doesn't, spread your deferrals so you're contributing something every single pay period through December, and confirm the annual limit against IRS.gov, because it moves most years and the number you remember from two years ago is probably wrong.

Vesting is the fine print that costs real money

Your own contributions are yours the second they leave your paycheck. The match may not be.

Cliff vesting means you own zero percent of the match until you hit a milestone, often three years, and then you own all of it at once. Graded vesting means you pick it up in slices, commonly 20% a year over five years.

Worked example, illustrative: graded 20%-a-year schedule, $12,000 of accumulated match, and you take a new job at two years and eleven months. You're 40% vested. You keep $4,800 and forfeit $7,200 back to the plan.

Six more weeks would have moved you to 60%. Nobody in HR is going to volunteer that. You have to know your hire date and your schedule, and when you're negotiating a start date somewhere new, a few weeks of flexibility can be worth more than the signing bonus. Ask the recruiter to shift it. The worst they say is no.

Safe harbor matches are immediately vested by design, so if your plan is safe harbor, skip this section and go be happy.

Order of operations when money's tight

The honest version, because "always max it out" is advice written by someone with no kids in daycare.

Get the full match first. A dollar-for-dollar match is an instant 100% return on that dollar before the market does anything at all, and nothing in your financial life competes with that. Not the mortgage. Not the car note.

The one place people reasonably argue is high-interest credit card debt. Carrying a balance at 24% is a fire, and there's a case for putting the hose on it before anything else. My own read is that you still take the match, because a 100% match beats 24% interest by a wide margin, and then you attack the card with everything else you've got. But if the card debt is keeping you up at night and killing your ability to stick to any plan, kill the card first and turn the deferral back on the month it's gone. A plan you actually follow beats an optimal one you abandon in March.

And if the match is genuinely out of reach this year, contribute something. Two percent. You can raise it with your next bump instead of absorbing the whole bump into your grocery budget.

The questions to actually ask

Bring these to your benefits contact or your plan's service line:

• What's the exact match formula, and is it calculated per pay period or annually?
• Does the plan have a true-up?
• What's my vesting schedule and what's my vesting service date?
• Is there a non-elective or profit-sharing contribution on top of the match, and does it require me to be employed on December 31?
• Can I direct my match to Roth? Recent law lets plans offer Roth-designated employer contributions, but the plan has to adopt it, and a Roth match is taxable income to you in the year it's made. Ask your CPA which side of that trade fits your bracket.
• Does the plan allow after-tax contributions above the deferral limit? Rarer, useful if it's there.

Then check your next pay stub. The match should appear as its own line. If the number doesn't match the formula, payroll made an error, and payroll errors on match calculations are more common than you'd think.

If nobody's matching you

Self-employed, 1099, running your own shop? There's no free money, but there's a bigger bucket. A solo 401(k) lets you contribute as both employee and employer, and the combined ceiling is substantially higher than the employee-only limit. A SEP-IRA is simpler to administer and has no employee deferral component. Which one wins depends on your income and whether you have staff, so run it past a CPA before you open anything.

And if you've got employees, offering a match is one of the least glamorous and most genuinely decent things a small business owner can do. It compounds in households you'll never see the inside of.

Limits, thresholds and rules change. Verify anything with a dollar sign attached against IRS.gov, and check SSA.gov and Medicare.gov when you get to the timing side of retirement. What life after sixty actually feels like is a conversation for BRO Seniors. This is just the plumbing.

None of the above is advice about your situation. Before you move real money, sit down with a fee-only fiduciary adviser or a CPA, and pay them for an hour of their attention.

Go look up the formula. It'll take eleven minutes and it's the highest-paying eleven minutes on your calendar this month.