IRA Financial Blog

How To Get Free Cash From Your Employer – Episode 258

Adam Talks

IRA Financial’s Adam Bergman Esq. explains how to get free cash from your employer when you save with a 401(k) plan, whether it’s via Safe Harbor contributions or through an employer match.

Wouldn’t you like free cash from your employer? Well, if your company offers a retirement plan, such as a 401(k), you absolutely need to take advantage of it. Not only can you put aside money for retirement in a tax-advantaged way, you may be missing out on free money. Depending on the type of plan, and how generous your boss is, you may be missing out on thousands of free dollars every year. In this podcast, Mr. Bergman will explain just how you can get free cash from your employer.

The Safe Harbor 401(k)

There are approximately 550,000 401(k) plans across the country. Many of which are “Safe Harbor” plans. The Safe Harbor 401(k) is a type of retirement plan, created in 1999, that elects to be treated as a safe harbor. Essentially, the business owner decides that he doesn’t want to go through the specific testing, such as the top heavy test. He or she wants the ability to max out the plan, no matter what the employees decide to do. If you have a regular 401(k), the test would fail if not enough employees are contributing enough to the plan. If the higher earners max out their contributions, but the rank-and-file employees do not, the IRS might step in.

Because of the costs involved, an employer might not set up a plan if he or she cannot take full advantage of it. That’s where the Safe Harbor option comes in. Essentially, you gain the ability to max out the plan, no matter what your employees do. However, you must contribute to the plan on their behalf a minimum amount. Basically, you have to make a contribution of a minimum of 3% of each employees’ compensation. You can choose to only match that amount if the employee contributes, or simply give them the 3%, whether they contribute or not.

Here at IRA Financial, we use the non-elective approach. Every employee receives 4% of their salary, regardless if they choose to contribute to the plan themselves. I can say that everyone is smart enough to contribute to the plan!

No matter the type of Safe Harbor plan, the employee has the ability to get free cash from your employer. If your job doesn’t have a 401(k) plan, it behooves you to bring up the advantages of offering one.

The Employer Match

Piggybacking off the Safe Harbor plan, is the whole concept of the employer match. While the Safe Harbor 401(k) is a great option for smaller businesses, many larger corporations off a regular 401(k). They won’t give you free money if you do not contribute to the plan. However, many plans out there will offer you a matching contribution. The reason for doing so are the tax advantages the company receives for contributing on your behalf. But, these companies have thousands and thousands of employees, so it doesn’t make financial sense to contribute on the behalf of everyone.

What should you do? First, you need to find out if there is an employer match. If there isn’t one, you should bring that up to the people in charge! If there is one, you need to figure out how to get free cash from your employer. There are generally two types of matches. First, it might be a 100% match, up to 3% of your salary. Secondly, is a 50% match up to 6% of your salary. No matter what the plan offers, you will get some sort of free money for retirement.

So long as you contribute to the plan, and your company offers a match, you will get free cash. Here’s how it works: You work for a company that offers a 100% match up to 3% of your salary. Let’s say you earn $40,000 per year. That’s $1,200 in free money you can receive. You simply need to contribute that $1,200 to the plan, and your employer will double it, giving you $2,400 in 401(k) contributions for the year.

Let’s say you earn that same $40,000, but your employer offers a 50% match up to 6% of your salary. You have the opportunity to receive $2,400 in free cash. However, since only half of your contribution is matches, you need to contribute $4,800 to receive the full match.

A good rule of thumb is to contribute enough to receive the entire employer match. That’s a 100% return on your contribution. There’s virtually no investment that will give you that kind of return!


The retirement system works. It doesn’t matter how much money you make, your race, religion or who you voted for! It’s all about simple math and the power of tax deferral and compounding interest. Getting free cash from your employer doesn’t cost you anything. You should be saving for retirement regardless, so getting a match or Safe Harbor contribution is a no-brainer!

Hope you enjoyed this episode of Adam Talks! Be sure to check out the podcast network page for all episodes of this podcast, along with three other ones. You can also check out our SoundCloud page to listen on the go.


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