How does employer matching affect retirement saving decisions?

• A. It decreases the rate of return.
• B. It has no impact on saving decisions.
• C. It effectively increases the rate of return and should be captured by contributing enough to receive full match.
• D. It reduces the amount you can contribute.

Answer: (C)

Employer matching boosts your retirement savings by adding money to your fund on top of what you personally contribute. That match acts like a guaranteed return, because part of your growth comes from dollars your employer provides at no extra cost to you, and those dollars compound over time with your investments. This is why you should contribute enough to receive the full match—it's free money that increases the effective rate of return on your retirement savings. Any additional contributions you make beyond the full match still grow, but missing out on the match means you’re sacrificing a high-return boost. Keep in mind some employers have vesting schedules, so you may not own the matched funds if you leave before they vest.