Previously in this series we set our nexus article: What is the Investing Order? In there we discussed how our Emergency Fund is the key to building wealth as it requires us to set a budget, and pay yourself first. Since that list is vital to planning for the future we’re going to work our way down through the list. As a reminder these articles are meant to be short and focused.

Note: I’ll put new terms into the Glossary Page, but I’ll make a short list at the bottom here as well.

An employer sponsored plan (ESP) is a company provided benefit, this can include medical as well as retirement options. Here we will focus on retirement plans. Many of these get their names from the part of the tax code that defines them. 401(k): from for profit businesses, 403(b) – public schools, non-profits, and religious organizations, 457(b) state and local governments, with a few non-profits and finally the TSP (Thrift Savings Plan) for Military and Federal Employees. There are also a few unique ones for small businesses and self-employed people: SEP IRA (Simplified Employee Pension), SIMPLE IRA, and Solo 401(k). I will write an article breaking them all down at a later date. Also, while out of vogue right now, I should probably bring up pensions as well since these are usually paid into out of your paycheck.

Many of these programs were designed to allow the individual to take control of their retirement instead of relying on pensions that could be mismanaged or dissolved.

In another article I break down the “True Cost of Employment” which is what an employer pays out in their portion of taxes and benefits associated with an employee. Now there can be a lot of nuance related to available benefits and the different ESPs but the key factor is this: If your employer offers a match it is part of your salary you are WILLINGLY giving up by not meeting it. Let me repeat, you are working for LESS money if you do not max your employer match to your 401k or whatever program it is.

This is why the Investing Order strives to point you to the Employer Match before completing your Emergency Fund. Looking at this mathematically, the national average is a 4% to 5% match. For 2026 the most you as an individual can put into a 401k/403b/457b/TSP is $24,500, unless you are over age 50. Then you can put in $32,500. The match is based on your salary, but it does have an upper limit. Which is a total of $72,000, or $80,000 if you are over age 50. If you remove the employee portion that means a match cannot exceed $47,500. An executive making $950,000 per year with a 5% match would hit the $47,500 amount exactly.

For most people that’s irrelevant, let’s look at some realistic salaries, with a standard setup of 3% $1 for $1 match, with 1% being $1 for $0.50 match totaling a 4% employer match.

Salary	Contribution 6%	Match 4%
$25,000	$1,500	$1,000
$50,000	$3,000	$2,000
$100,000	$6,000	$4,000

The average return of the S&P 500, which can be bought in index funds like VFIAX, or ETFs like VOO, is 7%. That is after inflation.

Using only the employer match and continuing it with zero increase over a 30 year working career, even the $25,000 a year employee ends up with almost four years of salary in their investment. If we combine the $1,500 they put in with the $1,000 from their employer we end up with:

That’s the same as over 9 years of salary, just for meeting the match of their employer.
I don’t want to crowd this article with too many pictures, but we’ll run it against the other two salaries as well. The $50,000 a year salary ends up with $472,303 and the $100,000 salary ends up with $944,607. All of these are the same 9.44 years worth of income, but obviously with higher income it’s easier to keep expenses lower and put even more into your retirement accounts.

That is the power of your employer match. It’s part of your wages that you shouldn’t leave on the table.

~~Miniwing~~
Investor, Parent, Stoic

Term	Definition
Employer Sponsored Plan (ESP)	Retirement or savings plans offered by your employer. Common examples include 401(k), 403(b), and 457(b) plans. Many include tax advantages and sometimes free matching money from the employer.
401(k)	Employer-sponsored retirement plan where you contribute pre-tax money; many employers match contributions (free money!).
403(b)	A retirement savings plan similar to a 401(k), but offered mainly to employees of public schools, nonprofits, hospitals, and certain tax-exempt organizations. Contributions are often pre-tax (reducing your current taxes), and many employers match a portion—great for building long-term savings with tax advantages.
457(b)	A retirement savings plan for state and local government employees and some nonprofit workers. Similar to a 401(k) — you contribute pre-tax money that grows tax-deferred until withdrawal.
TSP (Thrift Savings Plan)	A low-cost retirement savings plan for federal government employees and uniformed service members (like military). It works like a 401(k) with automatic contributions, potential employer matching, and simple investment options (funds tracking stocks, bonds, etc.)—one of the most efficient retirement vehicles available.
Employer Match	Free money your employer adds to your retirement account when you contribute. For example, they might match 50% of what you put in up to a certain percentage of your pay. It’s one of the best deals in personal finance.
SEP IRA	Simplified Employee Pension IRA. A retirement plan mainly for self-employed people and small business owners. Only the employer (you, if self-employed) makes contributions — easy to set up with high contribution limits.
SIMPLE IRA	Savings Incentive Match Plan for Employees IRA. A retirement plan for small businesses with 100 or fewer employees. Employees can contribute from their paycheck, and the employer must either match contributions or make a small contribution for everyone.
Solo 401(k)	Also called a One-Participant 401(k) or Individual 401(k). A retirement plan for self-employed individuals or business owners with no employees. You can contribute as both the employee and the employer, allowing very high total contributions.
S&P 500	A stock market index that tracks the performance of 500 of the largest U.S. companies. It is widely used as a benchmark for how the overall U.S. stock market is doing.
VFIAX	Vanguard 500 Index Fund Admiral Shares. A mutual fund that tries to match the performance of the S&P 500. It is a low-cost way to invest in the 500 largest U.S. companies.
VOO	Vanguard S&P 500 ETF. An exchange-traded fund that tracks the S&P 500 index. Like VFIAX but trades like a stock throughout the day and usually has a slightly lower expense ratio.