401(k) Company Match = Free Money

If your company offers 401(k) company matches, I highly, highly suggest taking advantage of it. I didn't realize how good a deal it was until I worked for a company that offered it.

The benefits:
The federal government sets a limit on how much an individual can contribute from his/her salary to 401(k). The pre-tax contribution limit for 2007 is $15.5k, for 2008 is $16k, for 2009 is $16.5k, etc. The company match is not counted under this limit. Thus, you can contribute $15.5k to your 401(k) this year and your company match can add money to your 401(k) on top of that.

The catch:
You will get a company match for a particular pay period if you made a contribution to your 401(k) for that pay period. Be sure to set your contribution % (the % of your salary pre-tax that you will contribute to your 401(k)) so that you will make contributions every pay period.

For instance, let's assume you gross $260,000 annually this year (just to make the math simple and to dream). Every pay period is 2 weeks, there are 52 weeks in a year, so you gross $10,000 every pay period. Assume that your company's policy states that your max pre-tax contribution to your 401(k) is 30% of your gross salary. Do you max it out at 30%? Nope.

With 30% contribution, you will be contributing $3000 to your 401(k) every pay period (every 2 weeks). You will stop contributing to your 401(k) after 6 pay periods (12 weeks). Once your contributions stop, so will your company match. No more free money for the rest of the year. If you changed your contribution to 6%, you will be contributing $600 to your 401(k) every pay period, or $15,500 for the entire year. You will hit the contribution limit for 2007 at the end of the year and end up with tons more money in your 401(k) because of the company match.