The 401(k) Habit Worth Building Early

If retirement feels like something to worry about later, you're not alone, and that's exactly why this is worth a few minutes now rather than a few decades from now. One part of your compensation is easy to overlook simply because it doesn't show up the way your salary does: what your employer adds to your 401(k).

Every dollar your employer adds to your 401(k) is money set aside for you, on top of your paycheck. How much of it is actually yours to keep can depend on your vesting schedule, but the opportunity to capture it starts with how much you contribute. In most workplaces, capturing the full match requires a contribution somewhere between four percent and seven percent of pay, according to Vanguard's 2026 How America Saves report. Yet 22 percent of participants contributed less than four percent of their pay in 2025, which, for many, means at least part of that employer contribution went unclaimed.¹

Most employers structure their match as a percentage of what you put in, not a flat amount. The single most common formula pays 50 cents for every dollar you contribute, up to six percent of your salary. If you stop short of that threshold, you're not just saving less. You're declining part of what your employer set aside for you.

Your own contributions are always yours from the moment they land in your account. What your employer adds is a different story. Just under half of employers vest matching contributions immediately, covering roughly half of participants nationwide. Many others use a graded schedule instead, meaning that money becomes yours fully over time, often over five or six years of service. Someone weighing a job change partway through one of those longer schedules is, in effect, weighing real dollars left behind, not just a new opportunity ahead.¹

Once you reach age 73, you must begin taking required minimum distributions (RMDs) from your 401(k) or any other defined contribution plan in most circumstances. Withdrawals from your 401(k) or any other defined contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10 percent federal income tax penalty.  

A company’s 401(k) matching can be stopped or decreased at any time. If a company experiences financial difficulties, its management team may elect to reduce or eliminate its matching program for a period of time.

None of this is about finding the "right" number to contribute in isolation. It's about understanding what your workplace is already offering and making sure that offer isn't going unclaimed. That's exactly the kind of detail worth a conversation, since the right contribution level depends on your income, your timeline, and how your employer's specific formula is built. We're glad to help you look at what you're currently capturing and where there might be room to capture more.

^{1. Vanguard, 2026}