Here is how a lot your organization’s 401(ok) match may very well be price in retirement

If you’re working and have access to a 401(k) plan, socking away at least enough money to grab the company’s matching contribution is key, experts say.

Yet how much is that extra cash worth?

Most companies that offer these workplace retirement plans will match your contributions up to a certain amount. Depending on your salary and the matching formula used, that could translate into thousands of extra dollars going toward your nest egg every year. And after leaving it there to grow? Your future self may thank you.

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“It’s so important to take every bit of money your company wants to give you,” said Kathryn Hauer, a certified financial planner with Wilson David Investment Advisors in Aiken, South Carolina. “Your employer is saying they’ll give you money and, to get it, you just need to set aside savings for yourself every year.”

While there are many reasons for not participating in your 401(k) plan — especially if your household income has suffered during the pandemic — some experts say that passing on your company’s match is like giving up part of your compensation. And, they compare the match to getting an immediate — and big — return on your contributions.

“If you have an employer that, in essence, is giving you a rate of return of 100% or 50% on your contribution, regardless of whether you’re 18 or 65, you really have to take the money,” said CFP Glen Smith, managing partner of Glen D. Smith and Associates at Raymond James in Flower Mound, Texas.

The most common matching formula, according to Fidelity Investments, is a 100% match for the first 3% you contribute, with a 50% match for the next 2%. Some companies also make contributions that aren’t based on a matching formula.

By way of example: Say your annual salary is $50,000. If you were just to contribute enough to get the employer match, the most common matching formula would mean you contribute 5%, or $2,500, in a year, and your company would put in another $2,000 — totaling $4,500 a year. If you did that for only one year, the money would be worth about $26,200 in 30 years, based on a 6% annual return, according to data provided by Fidelity Investments.

If you were to do that five years in a row, with your salary increasing 2% yearly, your account would be worth roughly $69,000 in 30 years. Ten years in a row? The account would hit $202,300 in three decades. And the amount that came from the employer match would be $89,900 — 44% — of it.

Of course, if you are able to contribute more than just enough to get the match, that can only help your nest egg grow. The contribution limit for both 2020 and 2021 is $19,500, with people age 50 and older allowed an extra $6,500 as a “catch-up” contribution for a total of $26,000.

Remember, too, that if you have a traditional 401(k) plan, your contributions are made pretax, which reduces your taxable income (and, in turn, how much you pay in taxes). If it’s a Roth, your contributions are made after-tax.

And, whether you contribute to a traditional or Roth 401(k), the company’s match always goes into the former and is not taxable compensation. Also, employer contributions do not count toward the contribution maximums.

While any contributions you make are always yours, the employer contributions often are on a vesting schedule — that is, you must work at that company for a certain amount of time before the match is 100% yours. It may happens gradually — i.e., 20% of the match is vested after one year, 40% after two years, and so on.

“Even if you don’t think you’ll be there long enough to be fully vested, even a 20% or 40% vested match is free money,” Smith said.

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