How does an employer 401(k) match actually work?

An employer match is free money your company adds to your 401(k) based on what you contribute. A common formula is 100% of the first 3% of pay plus 50% of the next 2% — so if you earn $100,000 and put in 5%, you contribute $5,000 and your employer adds $4,000. The match is usually deposited each pay period as you contribute, which is why you generally want to spread contributions across the whole year rather than maxing out early and missing later matches (unless your plan offers a true-up). At minimum, contribute enough to capture the full match — skipping it is leaving guaranteed compensation on the table. Your own 2025 employee limit is $23,500, and the employer match sits on top of that. Use wealthserene.com/tools/retirement-planner to see how the match compounds over decades.