Matching contribution

Matching Contribution

Money an employer offers to an employee's IRA or other retirement plan. Normally employers will offer an equal amount that the employee contributes up to a certain dollar amount or percentage of income. This is considered an employee benefit and allows a worker to save more (and accrue applicable interest) without enduring financial hardship.

Matching contribution.

A matching contribution is money your employer adds to your retirement savings account, such as a 401(k) or a SIMPLE.

It's usually a percentage of the amount you contribute up to a cap that the employer sets, such as 50% of your contribution up to 5% of your salary. The matching amount and any earnings are tax deferred until you withdraw them from your account.

In most plans, employers are not required to match contributions, but may do so if they wish. Employers also determine, within federal guidelines, how long you have to work for the company in order to be fully vested in the matching contributions.