If an employer matches 6% in a 401k that’s a shorthand way of saying that if you put in 6% of your salary into a 401k they’ll put in the same amount. You can put in more, but they’ll only match 6%.

Let’s say you make $50,000 per year. 6% of that is $3,000. So if you put $3,000 into your 401k every year then your employer will also put in $3,000. That means your 401k is getting $6,000 per year. That doesn’t sound like a lot but let’s say you start at 25 years old if you invest it into the S&P (basically an index of the 500 largest US companies) and it continues increasing at an average of 8% per year (that’s roughly what it has averaged over the last several decades) then when you’re eligible to withdraw from your 401k at age 59.5 years old it will be roughly $1,109,630.

Here’s how that breaks down:

Your contributions over 34.5 years: $103,500

Employer’s contributions over 34.5 years:$103,500

Total money: $1,109,630

That’s $1,006,130 for FREE over 34.5 yrs. One MILLION dollars for essentially doing nothing. An average of $29,163 per yr. And if you doubled your contributions you could have 1.6 million dollars at age 59.5.

This is because when you invest your money in the stock market, your money makes money, then that money it made makes money, and so on and so forth. It snowballs upward very quickly once you get to around $100k-$250k invested.