Skipping a 401(k) match at age 40 could cost you more than the amount your employer would have contributed. You also give up potential investment growth on that money during the next 25 years. Missed contributions and earnings can add up to a substantial gap in your retirement savings.
How Much Employer Money You Could Be Leaving Behind
Your employer’s matching formula determines how much you need to contribute to get the full match. As an example, let’s say you earn $85,000 and your employer matches your contributions dollar for dollar up to 4% of your salary. Here’s how much employer money you could receive (or leave behind) at different contribution rates.
| Contribution Rate | Contribution and Employer Match | Match Left Behind |
|---|---|---|
| 0% | $0 + $0 = $0 | $3,400 – $0 = $3,400 |
| 2% | $1,700 + $1,700 = $3,400 | $3,400 – $1,700 = $1,700 |
| 3% | $2,550 + $2,550 = $5,100 | $3,400 – $2,550 = $850 |
| 4% | $3,400 + $3,400 = $6,800 | $3,400 – $3,400 = $0 |
Contributing 4% would get you the full $3,400 annual match. If your salary and matching formula stayed the same for 25 years, that would add up to $85,000 ($3,400 × 25) in employer contributions before investment growth.
Employer contributions may also be subject to a vesting schedule. Your own 401(k) contributions are always fully vested, but your plan may require you to stay with the employer for a certain period before you own the full match.
A financial advisor can calculate your missed employer match and how higher contributions could affect take-home pay.
How a $3,400 Annual Match Could Grow to Almost $165,000
The employer match is only part of what you could miss. Each contribution also has the potential to earn returns, and those earnings can generate additional growth over time.
As an example, let’s say your employer contributes $3,400 at the end of each year for 25 years and the money earns a hypothetical 5% annual return. The calculation uses the future value of a series of annual contributions:
- $3,400 × [(1.05²⁵ − 1) ÷ 0.05] = $162,272
Here’s how the contributions could grow over time:
| Years Invested | Employer Contributions | Projected Balance Calculation | Projected Balance |
|---|---|---|---|
| 5 | $3,400 × 5 = $17,000 | $3,400 × [(1.05⁵ − 1) ÷ 0.05] | $18,787 |
| 10 | $3,400 × 10 = $34,000 | $3,400 × [(1.05¹⁰ − 1) ÷ 0.05] | $42,765 |
| 15 | $3,400 × 15 = $51,000 | $3,400 × [(1.05¹⁵ − 1) ÷ 0.05] | $73,367 |
| 20 | $3,400 × 20 = $68,000 | $3,400 × [(1.05²⁰ − 1) ÷ 0.05] | $112,424 |
| 25 | $3,400 × 25 = $85,000 | $3,400 × [(1.05²⁵ − 1) ÷ 0.05] | $162,272 |
After 25 years, $85,000 would come from employer contributions and approximately $77,272 from hypothetical investment growth ($162,272 – $85,000) at a 5% annual return. In this example, compounding nearly doubles the value of the employer contributions over 25 years.
This example is intended to show you how to calculate the investment growth of a match over time. Your return will vary based on actual investment performance, which may also include losses.
Contribute Enough to Capture the Full Match
If you want to capture your full employer match, you will need to confirm the required contribution rate in your plan documents and whether the match is subject to a vesting schedule. When contributing that amount is not practical, consider raising your contribution as your income increases.
For 2026, you can contribute up to $24,500 of your own pay to a 401(k). 1 The catch-up limit is $8,000 for those age 50 and older and $11,250 for participants ages 60 through 63. Employer matching contributions do not count toward these employee deferral limits, although a separate IRS threshold applies to total plan contributions.
A financial advisor can help you set a 401(k) contribution that fits your budget and retirement goals.
Photo credit: ©iStock.com/AndreyPopov, ©iStock.com/Dilok Klaisataporn
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