The match before anything else, as arithmetic

How it works

A match of 50 cents per dollar means a $100 contribution becomes $150 on the day it lands, a 50 percent return before any market movement. A full match means $100 becomes $200, a 100 percent return. A credit card at 24 percent, the highest rate most households carry, costs 24 percent a year, so a dollar sent to the match earns in one day more than twice what a dollar sent to the card saves in a year. The match only applies up to the plan's matched percent of pay, and contributions above that percent earn no match and compete on even terms with other uses. Unmatched money is where the debt arithmetic in the other door takes over. The plan's limit of this year's official 401k elective deferral limit (not yet verified here; see the official source below) applies to the worker's own contributions.

What it gives

The return on matched dollars is immediate and does not depend on markets.

It arrives inside a tax deferred account and grows there.

The matched percent is usually small enough to reach even with debt payments going on.

What it costs, or where the catch is

Unvested match is forfeited when a worker leaves early, which lowers the real return for a short stay.

The money is locked until 59 and a half except under conditions the IRS lists, with a 10 percent addition otherwise.

Only the matched percent earns the return, and dollars above it are ordinary contributions.

A worked example

Viktor earns $48,000, his plan matches half of contributions up to 6 percent, and he carries a $4,000 card balance at 22 percent. Contributing 6 percent, which is $2,880 a year, brings a match of $1,440, a 50 percent return the day it arrives. The same $2,880 sent to the card would have saved about $630 of interest in the year, since $2,880 times 0.22 is about $634. He takes the full match and sends the rest of his spare cash to the card.

Where it goes wrong

The common miss is pausing contributions to attack a card and giving up a 50 percent return to save 22 percent.

Who confirms it for you

Nobody has to; it is arithmetic you can check yourself with the numbers above.

The official source

IRS: 401(k) plan overview. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.