David’s salary is $29,512, and he makes 401K contributions. His company will match 100% of the amount he saves up to 6%. How much will his company contribute if he cont
The Correct Answer and Explanation is:
Step-by-Step Calculation:
- Annual Salary:
David earns $29,512 per year. - Maximum Match Percentage:
The company matches 100% of his contributions, but only up to 6% of his salary. - Calculate 6% of Salary: 6% of 29,512=0.06×29,512=1,770.726\% \text{ of } 29,512 = 0.06 \times 29,512 = 1,770.726% of 29,512=0.06×29,512=1,770.72
✅ Final Answer:
$1,770.72 is the maximum amount the company will contribute to David’s 401(k) if he contributes at least that much himself.
🔍 Explanation
A 401(k) is a retirement savings plan offered by many employers in the United States. It allows employees to save and invest a portion of their paycheck before taxes are taken out. One of the key benefits of a 401(k) is the employer match—this is essentially free money your employer contributes to your retirement account based on how much you contribute yourself.
In David’s case, his employer offers a dollar-for-dollar match up to 6% of his salary. That means if David contributes 6% of his $29,512 salary, the company will also contribute the same amount. However, if he contributes less than 6%, the company only matches that lesser amount. For example, if he only contributes 4%, the company will only match 4% of his salary.
The maximum the company is willing to contribute is 6% of $29,512, which is $1,770.72. To receive the full match, David must contribute at least that same amount over the course of the year. If he contributes more than 6%—say, 8% or 10%—he will be saving more for retirement, but the company will still only match up to the 6% threshold.
This type of employer match is an excellent incentive to save for retirement. Financial advisors often recommend contributing at least enough to get the full employer match, as it is effectively a 100% return on the amount contributed—something no investment can reliably guarantee. Ignoring this benefit is essentially leaving free money on the table.
In summary, as long as David contributes at least $1,770.72 to his 401(k), his employer will match the full 6%, resulting in a company contribution of $1,770.72 for the year.
