Leora is a new graduate who just started her first full-time job at a private company. Her employer offers a 401(k) plan with a long vesting schedule but a generous employer match of 100% up to 6% of her salary. Given that Leora has limited savings, what would be the best course of action for her to maximize her retirement savings?
Answer
A
contribute to a personal investment account instead of the 401(k)
B
contribute the minimum amount to the 401(k) and focus on building emergency savings
C
avoid contributing to the 401(k) and rely solely on personal savings
D
contribute as much as possible to the 401(k) to take full advantage of the employer match
Explanation
A 100% match means the employer adds one dollar for every dollar Leora contributes, up to 6% of her salary. Contributing at least 6% captures the full match and gives her retirement savings a substantial boost. A long vesting schedule may mean she forfeits some employer contributions if she leaves early, but it does not make passing up the full match the best choice when maximizing retirement savings.
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