How Good Is The Average 401k Match?

The 401k has always been a curious system because on the one hand, it’s better than a sharp stick in the eye, but on the other hand, it’s simply not enough to retire on given the $16,500 cap on annual pre-tax contributions. In fact, I was so jaded by the 401K system that I recommended everyone max it out, but mentally write it off like I do social security. This way, you are forced to build your “real” savings and investments with your disposable income.

Recently, I got a kick in the pants when a 57 year old financial adviser named Larry told me he has over $5.5 million in his 401K!  Holy crap, I thought to myself. How the heck did he accumulate so much, just in his 401K? The answer was simply longevity, performance, and company match.


Larry is a senior partner at his firm. Not a surprise since he’s been there for 35 years!  He has been maxing out his 401K ever since the mid 70s. With a company match of $3,000 plus 9% of his base salary, Larry has been able to accumulate $40,000 to $49,500 every year for the past decade alone! You see, it’s not just $16,500 one can contribute.  It’s $16,500 + $3,000 + (9% X his $350,000 salary) = $51,500 capped at currently $49,500 by law. In 2006, the maximum pre-tax contribution by employee and employer was $44,000 and has risen with inflation since.

Some of us might be thinking, well that’s just a ridiculous example since few people make $350,000 a year, and 9% of my base salary might only equal $5,000 – $9,000. Furthermore, some companies might not be as generous to provide such a high percentage match. If you’re thinking that way, that’s fair. However, you’re missing the point, which is that Larry got to such a lofty 401K balance because:

1) Larry maxed out his 401K every year. He did so since graduation because he envisioned great wealth during retirement.

2) Larry stayed loyal to his firm for 35 years, which has allowed him to maximize his retirement options and benefits. If you change firms constantly, often times there is a 1 year grace period before a company will match. Furthermore, once you do get the company match, there is a several year vesting period before the money is yours if you decide to leave.

3) With 35 years of service, Larry has ultimately been promoted and given salary increases as well. Not only is Larry a partner, he has also built up tremendous social capital within his firm. Larry doesn’t need to continue working, but he enjoys working with his friends.


Based on an informal survey of friends off-line and on-line, the average 401K percentage match is around 5% of salary up to $3,000. In other words, if you make $80,000 a year, you don’t get $4,000 in free money, but max out at $3,000 for a total of $19,500. The responses I got ranged from 0% to 9% match with many employers providing company profit sharing after a minimum number years of service or company stock grants.

With profit sharing and stock grants, company matching easily rises to 20% of the respondent’s base salary.  20% of one’s gross income going in to one’s 401K as pre-tax income is a fantastic yearly boost!


I’ve gone from being a skeptic of the 401K to being a believer.  It’s really hard for me, and I’m sure many of you to see how a 401K can help us much in retirement after the first 15 years of contribution.  But, as we get older, I’ve come to realize that it really isn’t just the $16,500 which is going in.  It’s more like $20,000-$49,500 every single year, which is a much more impactful thanks to our employers’ contributions.

Longevity at one place really does have its merits. Just ask Larry with 35 years of experience and $5.5 million in his 401K alone!  It also helps that the stock and bond markets aren’t in a death spiral either. No longer should we look at our 401K as a pitiful sub-account with woeful contribution to our financial well-being. So long as the government doesn’t pork us in the end with higher taxes upon withdrawal, our 401Ks are going to be huge!


Manage Your Finances In One Place: I encourage everybody to get a handle on their finances by signing up with Personal Capital. They are a free platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing and when my CDs are expiring.

The best part of Personal Capital is their 401K Fee Analyzer tool. It is now saving me over $1,000 a year in portfolio fees I didn’t know I was paying! They’ve also come out with their incredible Retirement Planning Calculator that uses your linked accounts to run a Monte Carlo simulation to figure out your financial future. You can input various income and expense variables to see the outcomes.

Retirement Planning Calculator

Sample retirement planning calculator results

I’ve sat down with Bill Harris, the CEO of Personal Capital for a couple hours at their HQ in Redwood City and I’m confident their product will help improve your finances for free. I’ve been a user for three years now and love their free product.

Post updated on 7/15/2015. Let the bull market continue.




Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

You can sign up to receive his articles via email or by RSS. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information.

Subscribe To Private Newsletter


  1. Money Beagle says

    I’ve been at 0% for most of my career which has been frustrating to say the least. There was a time where my current employer was matching 6% but that got cut in 2008. They’ve said that will most likely be restored in some format later this year, so I’m keeping my fingers crossed.

  2. says

    Here, Kiwisaver maxes out at 8% (though I believe you can manually contribute more by making additional payments yourself). I contribute 4%, because I have cash savings I want to bulk up on. And I get the govt-mandated 2% company match plus up to $1042 a year from the govt’s contribution. I’m currently weighing up a possible new position where the company wouldn’t contribute at all…I’m not too sure whether losing out on that 2% is a dealbreaker.

  3. says

    My company matches 5% dollar-for-dollar to the federal limit. To bad I don’t make enough to get there yet. How, like you said, longevity and solid returns should yield me a nice nest egg when I retire!

  4. Mike Hunt says

    The disadvantage of working overseas is that I cannot participate in a 401k program- stopped my 401k in 2006 and only have $140k in it. All the other investments are with after tax money. In my local country I can contribute up to 3% of my income tax free into a provident fund and get a company match (up to 3% based on step vesting 5 years of service) So the actual company match is 2/5 of 3% or 1.2% only. Still it’s better than nothing so I’m taking it.


  5. says

    Unfortunately, there is no match in the public sector, however I will receive a pension. I supplement it by maxing out my 403B (same as 401K). In my case, all of my investments and various retirement incomes fill a different role in my retirement. Some (Social Security & pension) are fixed and have inflation escalators. My investments (IRA, Roth IRA & brokerage acct) are my growth aspect. Multiple streams of income even if I have to support it!

  6. says

    I feel very fortunate to receive a 100% match, up to 6%.

    I’m personally a bigger fan of Roth 401(k) contributions as I’m completely convinced we will be entering an era of higher tax rates in the not too distant future.

    I don’t exactly plan to be a minimalist in retirement either. Big distributions, here I come!

  7. says

    If nothing else, I think all companies have a responsibility to provide a 401k to their employees. There is no reason not to provide an account through which your employees can save a maximum of $16,500 pre- or post-tax, even if the company doesn’t match the money.

    Sure IRAs, whatever–maximum annual contribution is still only $5,500. Retirees will need more than that.

  8. says

    No match for myself, but my husband gets a 50 percent match, up to 6 percent. (So, 3 percent of salary I suppose.) There is no cap on dollar amount from the company. We max this out every year, and we max out mine too.

    Regarding Larry, loyalty definitely paid for him. However, it is not always the best option. For example, job hopping definitely helped my husband. However, he left the Big 4 because of the amount of travel and we had a baby and another on the way. (That was many years ago). Had he stayed with Deloitte, we would probably have more money than now, but the sacrifice he would have to make with the family was not worth it. The other job changes were for better opportunities.

    I just talked to someone yesterday who was let go after 23 years with her company. Great employee, but probably viewed as overpaid by the company. Now, many are taking in contractors instead.

    • says

      Hopefully that laid off employer got a sweet layoff package!? 23 years would mean almost a year severance package for me. Assuming s/he saved and invested all that time, s/he is sitting pretty no?

      Sometimes it’s hard to stick around for so long, but that’s definitely one of the keys.

      • says

        I think what is hard for a lot of people when they get laid off for 20-25 years is they then have kids heading off to college when they get unemployed.

        I believe she gets 2 weeks severance for every year worked. So, she will be fine for awhile.

        In our case, we always based our expenses on just my husband’s income since I was home with the kiddos on and off. However, when I don’t work, savings really goes down…

      • says

        Since my job is considered “at will” employment, per my job offer, I don’t think there are severance packages available here… It must be a nice feeling to know you’d get a year’s salary as severance in return for 23 years of work though!

  9. says

    My company cut the 401(k) program because of the recession. Prior to that, your first 3% was matched at 100%, and an additional 2% was matched at 50%. So essentially, if you put in 5%, the company put in 4/5 of that.

    Based on my income, however, I wasn’t even close to maxing my 401k when they still had the program. It would have swallowed almost 50% of my then-salary.

  10. says

    I’ll attempt a max out if I had faith in my 401k provider. But until then I’ll match what my company matches.

    But either way, no one’s ever regretted having saved too much!

  11. says

    My company matches 5% dollar-for-dollar, and then adds an additional 2% pension contribution that is fully vested after 3 years. So I am pleased with our plan. As earlier comments said, IRA contributions aren’t enough to fund a retirement. You can use a 401k, traditional IRA, Roth IRA, and HSA to save for retirement, and I highly recommend them all, in varying degrees of course.

  12. says

    Most of the companies I worked for never matched. Cheap bums! I did have a few profit sharing ones. Funny, a one year contract was the only time I reaped a company match. But then the recession hit and they decided to run on a skeleton crew.

  13. Kathryn C says

    Wait, is that Audrina Patridge (from The Hills) with an old man? I’m confused. Oh, right, on to the 401k discussion……. my company provides an awesome 401k match and I’ve have been maxing it out for about 11 years now. I probably won’t stay as long as Larry though. I am a huge fan of 401ks, in fact, for me, it would be a key factor when taking a job (ie whether or not they offer and how much they match)

  14. Sunil from The Extra Money Blog says

    in my working years (banking), it was always a 100% match up to 6%, plus 4% whether or not i invested for a total of 16%. i maxed out the plan my first 4 years and eased off after that

    doing a big ecomm project for a retail company right now. they match 100% of their employees’ first 3% – seems tooooo low but i guess that is retail? further, employees are not eligible until a full year’s service. how sad.

    Investor Junkie is right – that is exactly what i did some years down the road. i actually published a blog post on exactly that topic!

  15. says

    We get 4-5% or so total match with no cap but I only contribute like 10% per year. I put the remainder in a Roth IRA instead. Why? My Roth is self-directed, thus I have better access to lower cost funds, better funds and my tax rates will likely be MUCH higher 30 years down the road than my current tax rate. Thus, I want to hit my 5K in the Roth over an extra 5K in the 401k any chance I get.

  16. Glen says

    At my previous employer they matched 4% when you contributed 6%. I was also able to get into their cash plan (which I’m collecting monthly now!).

    Like Investor Junkie mentions, a solo401(k) can be more generous. I’ll be looking into those later in the year.

  17. says

    Sounds like a pretty good match to me. As far as I can tell, I’ve never heard of any fiscal problems or savings issues with the Kiwis!

    @Money Beagle
    As anybody asked HR recently? Cuz 0% kinda sucks, no doubt about it!

    @The College Investor
    For sure.. if you just stick with your employer for the long term, of course if you like what you do, I think that’s like 60% of the battle to getting wealthy! Being in the game!

    100% match up to 6% is pretty good. Although, I think paying taxes up front to the government is a very, very silly thing. Pls read:

    Good question on what exactly is the “free money” aspect, since you own your own company! Perhaps the answer is………… 0? Or whatever you can max out times the tax rate = free money?

    • says

      My perspective is that the only way in which the United States’ unfunded obligations will be fulfilled is through higher taxes. Possibly a national VAT, but I doubt it.

      I also believe that a wave of inflation (not transitory) produced by emerging market demand is not far over the horizon. This will likely increase distributions needed in retirement to maintain a certain lifestyle, therefore elevating me into a higher tax bracket.

      These things coupled together are why I personally diversify my portfolio into Roth accounts. I like to think of it as a hedge against future tax environment uncertainties.

      As much as I dislike it, I believe the US is shifting toward a European style economy and all of the trappings that go with it, including higher taxes.

  18. says

    Any chance you can ask them to reinstate now that the economy is rocking and rolling? Seriously, based on what I’ve seen, and my own accumulation over the years…. the 401K really starts adding up after a while!

    Don’t think your 401K provider is going anywhere mate. Max it out!

    @Investor Junkie
    In my example, basically you can get $49,500 a year total with your contribution and company match and profit sharing once you make X amount.

  19. says

    Any chance you can ask them to reinstate now that the economy is rocking and rolling? Seriously, based on what I’ve seen, and my own accumulation over the years…. the 401K really starts adding up after a while!

    Don’t think your 401K provider is going anywhere mate. Max it out!

    @Investor Junkie
    In my example, basically you can get $49,500 a year total with your contribution and company match and profit sharing once you make X amount.

  20. says

    Our company puts in 3% of your salary, but you don’t need to contribute anything to get the employer contribution. It’s nice that everyone’s getting the max that they can, but it always takes away the incentive to get you to put your own money in first.

  21. says

    I get 6% contribution to 401k whether I put any $ in or not. I never thought about how much the senior executives get to their 401k. Their 6% must be more than my max contribution! Thanks for opening my eyes.

    • says

      Wow, that’s a good benefit whether you put money in our not. It’s just amazing after a while that we get to accumulate so much.

      And after you have so much, being up 10% is that much greater.

  22. says

    That’s a tough thing for a lot of people to think about staying in the same job for 35 years. It’s pretty much unheard of for anyone in our age group to stay at any place longer than 5-10 years.

    • says

      Which age group are you referring to? Why is it unheard of? I’ve been at my place for over 10 years, and hope to work for another 5 years before I think about doing something else.

  23. says

    As a contractor, I don’t get a match through the contracting house. But, as you say, I’m not counting on it as a major part of my income when I reach retirement age. I only really started it up to go with my Roth IRA as a hedge against taxes. I picked the four funds with the smallest management fees and don’t touch it except to rebalance every 6 months, if necessary.

    The plan is to generate enough investment income well before I hit the minimum withdrawal age (a smidge more than 20 years.) To that end, I don’t max out the 401k. I get about halfway there and put the other half into a regular brokerage account. I also max out my Roth account. All in all, about 25% of my pre-tax income goes into investing. As I pay off my student loans over the next 2-3 years, that money will be transitioned into investments.

  24. says

    i’m in agreement on the 401k thoughts….and I’m also a strong proponent of maxing out your roth IRA…..even if you have to use emergency funds to do it…..because you can always just take it back out if you need it, the only penalty you pay is if you try to take out the earnings….and of course if you don’t take it back out, earnings are tax free!

    • says

      That is a good thing about having the flexibility to take out your ROTH money if you need it. But, I’m always AGAINST paying more tax to our irresponsible government than I have to.

      If the government had a balanced budget and I could see more where my money is going, great. But they do not, and I do not see.

  25. casey1982 says

    The company I work for matches 401k contributions dollar-for-dollar up to 5%. In addition, they automatically contribute 4% to a separate pension fund. It’s nice; they actually upped the amount they contribute to the pension from 2% about two years ago!

  26. says

    401k contributions can add up quick and getting a corporate match is such a good way to boost your retirement savings. Increasing your contribution whenever you get a raise is another way to keep yourself disciplined and watch your balance grow.

  27. Marc says

    Man I must be the home run hitter here, 150% match up to 10% of salary or $16,500 whichever is lower. Though the industry standard seems to be around 100% match.

  28. Rick says

    My employer matches three to one (300%) up to 5% of my salary. I have been doing the 5% contribution which is basically 20% of my salary and putting $5,500 into a Roth IRA. I dont have the best fund selection in the 401K but starting out up 300% on my money I will take it every paycheck.

  29. Tippy says

    My company matches 7% of pay and does another 10% in Profit Sharing so a total of 24% of pay goes into my 401K annually at a minimum.

Leave a Reply

Your email address will not be published. Required fields are marked *