How To Get Free Money From Your Employer?

free money
401k
ESPP
401k optimizer
investing
Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 2 min read

šŸ’µ Do you want free money?

1ļøāƒ£ Get the maximum 401k match from your employer.

2ļøāƒ£ Enroll in your companyā€™s ESPP program.

āœ… 401k Match: Most employers match a portion of your 401k contributions. For instance, Microsoft matches 50% to employee contributions with no upper limit. If a Microsoft employee maxes out their 2023 401k contribution of $22,500, then Microsoft will contribute $11,250 to the 401k account. This is free money! But if you only contribute $10,000 to your 401k, Microsoft will only contribute $5,000, which means you will leave more than $6,000 of free money(!) on the table. Hereā€™s the best part: all this money is pre-tax, so when you contribute $22,500 into your 401k, you are also saving taxes by reducing your taxable income!

šŸŽÆ You can then use Xillion 401k Optimizer to find the right funds for your 401k account that get you to financial independence.

āœ… ESPP: Some companies, especially in tech, let employees purchase company stock at a discount, typically 10%-15%. If you work at say, Square, you can contribute up to $25,000 a year. Square will purchase company stock on your behalf at a discount twice a year, and every six months is called the offering period. It gets even better: the company purchases the stock at the lower of the first day or the last day of the offering period. If the stock was at $50 at the beginning of the offering period and rises to $60 at the end, you get a 15% discount on $50, and the company purchases stock for you at $42.50. You can decide to keep the stock as a long-term investment. Or you can sell the same day and pocket $17.50/share profit. This profit is free money. You donā€™t have to do anything, other than fill out a form with your HR department.

šŸ”‘ If you decide to sell your ESPP stock, you can use Xillion Invest to explore what other investments to buy with this money.

šŸ’° In both these cases, you need to first save and invest by making your contribution, and then you get free money as a consequence of this saving. In my experience, this process of saving is a huge benefit in itself because this money doesnā€™t hit your regular savings or checking account and doesnā€™t get spent right away. šŸ’°

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