- Imani Porter, 25, has built a net worth of $250,000 through investments.
- She already has $77,000 in her retirement account.
- Knowing terms like 401(k) matches, HSAs, and vesting periods will help her get the most out of her workplace benefits.
At 25, fintech employee Imani Porter already has
$250,000, which includes $77,000 in her 401(k) and IRA accounts.
After graduating college and starting her first full-time job, Porter learned how to invest in the stock market and make the most of her workplace benefits. She maximized her company’s 401(k) match and took advantage of the employee stock purchase program, which allows her to buy stock in the company she works for at a discount.
To build her retirement savings as quickly as possible, Potter needs to know the following three terms.
1. 401(k) matches
“I never really understood what a 401(k) match was until I got my first job out of college,” Porter told Insider. A 401(k) is an employer-sponsored, tax-advantaged retirement account in which you distribute a percentage of your pretax income.
Your employer may also offer a 401(k) match, which means they will match your contributions to a certain amount. Matching 100% of your contribution to 3% or 6% may not sound exciting for your company – every company will have different benefits – but people keep ignoring that it’s free money.
“Usually, you can discuss with HR what this magic percentage contribution will be,” Porter said. “Because I take my retirement account very seriously, I will only consider working for an employer if they provide some kind of match in my benefit package.”
2. High Speed Rail
A Health Savings Account (HSA) is a triple tax-advantaged account that can be used to pay for your health care when you choose a high-deductible health plan. You deposit pre-tax dollars into the account and you can then invest. Then, withdrawals for covered health care expenses are tax-free. Retirees over age 65 can use these funds for other non-healthcare expenses without paying taxes, and all growth in the account is tax-free.
“Many people don’t realize how beneficial an HSA can be,” Porter said, adding that some companies match your HSA contributions the same way they do a 401(k) — even more free money.
3. The vesting period
If the company you work for offers stock options as part of its benefit plan, you need to know what a vesting period is. In retirement plans and stock option plans, vesting refers to an employee’s ownership of their pension or stock options. The vesting period is the time an employee needs to work with the company to claim the benefits provided.
Porter learned this lesson the hard way. “Unfortunately, I didn’t understand this until after I left my first employer,” she said. “I worked for them for a year and then went to a new company. It wasn’t until much later that I realized the full vesting period was two years after joining.”
During that year of employment, Porter paid pension and stock option benefits, but ultimately lost them because she didn’t stick around for the entire vesting period.
“It should definitely be on the radar when people think about working at certain companies. And understand that if they leave before the vesting period, they could lose that money,” she said.