How Good Is The Average 401k Match?

Are you wondering how good is the average 401k match? This article will go through what many companies are helping contribute to their employee's retirement benefits.

In summary, the average 401K percentage match is around 5% of salary up to $3,000. In other words, if you make $60,000 a year, you will get a 401k match maximum of $3,000. If you make $100,000 a year, you won't get a 401k match of $5,000. It will be capped out at $3,000. But again, this is just the average.

The 401k has always been a curious system. It doesn't do as good of a job as a pension for life in taking care of an employee's golden years. But it's also better than nothing given you get to contribute money tax-free and let it grow tax-free until withdrawal after age 59.5.

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.

401k Millionaire Potential

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 $18,000 one can contribute. It's $18,000 + $3,000 + (9% X his $350,000 salary) = $51,500 capped at currently $49,500 by law. In 2021, the maximum pre-tax contribution by employee and employer is ~$589,000 and has risen with inflation since.

See: How To Save Over $100,000 Pre-Tax A Year For Retirement if you're curious to learn more.

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 due to the following reasons.

How One Man Became A 401k Millionaire

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. The average 401k match should rise over time with inflation.

Related: Here's When You'll Become A 401k Millionaire

The Average 401k Match Should Increase

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!

401k savings targets by age - The Average 401k Match

Max Out Your 401k For Your Retirement

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 401k contribution which is going in. It's much more 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!

Related: How Much Should I Have In My 401k By Age

Recommendation For Managing Your 401k

 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

Once you're done maxing out your 401k, it's time to build your after-tax investments as large as possible so you can earn passive income. Who wants to work until 59.5 anymore?

About The Author

57 thoughts on “How Good Is The Average 401k Match?”

  1. Indecisive_guy

    @James: I do expect to stay with the company (its a state university, so I hope it won’t go out of business soon either), and the annuity is a lifetime one. Another advantage of the pension is they are giving me a TDA account, on which there is a 8.25 guaranteed return, which is pretty good. I figure I’ll put a 6% each in the pension scheme and the TDA, and fool around in the stock market with the rest of my savings (appropriately moving stuff into bonds as I age, according to financial samurai’s chart).

  2. Pensions are great if you expect to stay with the same company for the majority of your career. You may want to check with your coworkers to find out the likelihood of this.

    You will need to confirm whether that 55% payment is for a fixed term (e.g., 120 months/ten years) or a lifetime annuitant. Also, check how much you will get if you want payments to continue if you predecease your spouse.

    Figuring on a 30 year career, you will have paid approximately 180% of your annual salary into the pension. If you pay into the 401k, your contribution plus the company match will equal approximately 450% of your salary plus any gains or losses incurred on your investment choices.

    You can roll over either a pension or a 401k into an IRA account if you leave the company; however, some company pensions will not permit a rollover until you are eligible to draw the pension.

  3. Indecisive_guy

    I’m having a hard time choosing between a pension and a 401k. Pension requires me to contribute 6%, and at retirement pays 55% of final salary. In the 401k too my minimum contribution is 6%, but the employer pays 9% as long as I pay my minimum!

    I know the conventional advice is to grab a pension plan when you see one, but this has me confused as hell. Advice?

  4. Keykeyadventures

    Haven’t seen any comments on this article. I wanted to provide a 2016 perspective, my company currently only has a Pre-tax 401K plan, matching 50% of the first 6% that you contribute. Also, has immediate vesting.

  5. 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.

  6. 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.

  7. 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.

  8. Mike - Saving Money Today

    My company matches 50% up to the first 6% of compensation, so 3%. Not the best but not the worst either.

  9. 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.

  10. 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!

  11. 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!

    1. 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.

  12. 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.

  13. 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.

    1. 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.

  14. 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.

    1. 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.

  15. 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.

  16. There is part of the equation you left out and that has to do with higher earners being limited by lower earners’ deposits into the system.

    So I am curious if he was lumping all his qualified dollars together when he gave you the number he was saving per year.

    1. Sunil from The Extra Money Blog

      yeah tell me about it, especially after coming from an environment where 10% was being put in by the MAN. they all have their ups and downs…

  17. @Wojo
    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.

  18. @Wojo
    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. @eemusings
    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?

    1. 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.

  20. 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.

  21. 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.

  22. Sunil from The Extra Money Blog

    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!

  23. 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)

    1. Ah yes.. looks like her doesn’t she? The idea is to show that if you max out your 401K and accumulate millions, even if you look like that, you can get that! Brilliant!

  24. 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.

  25. 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.

  26. 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!

  27. 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.

    1. 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.

      1. 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…

      2. 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!

  28. 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.

  29. I run my own company so 100% match up to 100% of my contribution (or is it really 50% of my contribution??) every way you look at it? :)

  30. 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!

  31. 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!

      1. barefoot James

        Good luck with a pension. Walter Energy, headquartered in Hoover Alabama, is going through bankruptcy and announced this week that pensions for employees already retired will be slashed 23% starting in January 2016.

  32. 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.


  33. 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!

    1. take the 5% match free 100% gain. You make the money yet have a spending problem. Pay yourself first.

  34. 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.

  35. Money Beagle

    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.

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