Let’s get one thing straight:
Not all 401(k) plans are created equal.
Just because a company offers one doesn’t mean it’s good.
You don’t need to be a financial advisor to understand the difference—you just need to know what to look for.
So here’s the checklist to make sure your “retirement benefit” isn’t just a line item on a brochure.
✅ 1. Is It a Safe Harbor Plan?
If you take one thing from this post, let it be this:
Safe Harbor = You get the employer match no matter what.
In a traditional 401(k), the company can say,
“You only get the match if we pass non-discrimination testing,”
which is code for:
“You might get it… or you might not. We’ll let you know after tax season.”
A Safe Harbor 401(k) bypasses all that. It legally requires the employer to give you the match, no loopholes.
🚨 Red Flag: If a company says “We offer a 401(k)” but can’t confirm whether it’s Safe Harbor—assume it’s not.
📈 2. What’s the Vesting Schedule?
Vesting = how long you have to work there before the employer match becomes yours.
There are two main types:
- Immediate Vesting: You own the match as soon as it hits your account.
- Graded Vesting: You earn ownership slowly, usually over 3 to 6 years.
Let’s say your employer matches $5,000 in year one.
- If it’s immediate, that’s your $5K—even if you quit next week.
- If it’s graded and you’re only 20% vested, you’d walk away with $1,000 and lose the rest.
🤝 Best case: Safe Harbor with immediate vesting.
⏳ Still decent: 100% vesting by year 2 or 3.
❌ Dealbreaker: 6-year vesting cliff with no flexibility.
💵 3. How Much Do They Actually Match?
Here’s where people zone out and miss the real value.
“We match 50% of the first 6% you contribute.”
Translation: If you put in 6% of your salary, they’ll add 3%.
So if you make $80,000:
- You contribute 6% = $4,800/year
- Employer adds 3% = $2,400/year
- You end up with $7,200/year in your 401(k)
📊 Decent match: 3%–4%
🔥 Elite match: 5%+ with immediate vesting
🪤 Lame match: “We match 1%” or “we’ll let you know during our annual review process”
🧠 Bonus: Don’t Ignore These Details
- Investment Fees: Are you stuck with high-fee mutual funds or do you get access to low-cost index funds like Vanguard or Fidelity?
- Roth Option: Can you contribute after-tax (Roth 401k) for tax-free growth?
- Plan Administrator: Some companies use platforms with horrible UIs and limited fund choices—ask who runs the plan.
🧠 TL;DR (Because You’re Busy)
Here’s your 401(k) checklist when reviewing an offer:
- ✅ Safe Harbor Plan? (You want this.)
- ✅ Vesting Schedule? (Faster is better.)
- ✅ Match Amount? (3–5%+ is good.)
- ✅ Investment Options? (Low-fee funds = more $$$ over time.)
If you get these 4 right, your “retirement plan” is actually worth something.
If not, the 401(k) might be more smoke than substance.
Want someone to actually break this stuff down for you when you’re considering an offer?
That’s what we do.
You focus on the job. We’ll handle the fine print.
