A good retirement plan can add thousands of dollars to your pay. We've done the homework on figuring out which FAANG (Facebook, Amazon, Apple, Netflix, Google) companies offer the best 401k plan. If you’re curious about other companies’ 401k plans, check out the Levels.fyi 401k comparison.
First off, what’s a 401k Plan?
401k plans are retirement accounts offered by many U.S. employers to their employees. To contribute to a 401k, you’d typically ask your employer to deposit a certain amount of your paycheck into the account. Depending on the plan, you’ll either have that money invested for you or choose how to invest the funds yourself.
401k plans are tax-advantaged, which is a big benefit compared to a traditional investment account. You’ll either only pay taxes on the amount you initially contribute (with a Roth 401k) or pay taxes once you withdraw funds from the account (with a Traditional 401k). In comparison, a traditional investment account. Not all employers offer a Roth 401k, so if you’re earlier in your career and expect to earn more in the future, you should look for an employer that offers a Roth 401k to make the most of your money. And if you make more than the income limit for a Roth 401k ($139,000 if you’re filing single for the 2020 tax year), you might want to see if your company offers Roth conversions, also known as “backdoor” or “mega backdoor” Roth IRAs.
What’s 401k matching?
A great benefit that some employers offer is 401k matching; it’s literally free money for retirement. WIth a 401k matching plan, when you contribute to your 401k, your employer will also contribute a certain amount so you get extra money to invest.
401k matching plans vary a lot. Some employers are quite generous with their contributions, and others don’t provide matching at all. Also, some employers will match up to a certain percentage of your salary and others will match up to a specific dollar amount, no matter how much you’re getting paid. However, there are two main types of matches to be aware of: the partial match and the dollar-for-dollar match.
With a partial matching plan, your employer will match a certain percentage of the money you contribute to your 401k, up to a specific amount. A common partial matching plan is a 50% match on the first 6% of your salary — meaning that your employer will match half of every contribution you make to your 401k, but only until they’ve contributed 3% of your total salary.
With a dollar-for-dollar matching plan (also known as a full matching plan and 100% matching plan), your employer will contribute the same amount as you do, up to a specific amount. For example, if your employer offered a dollar-for-dollar match up to 4% of your salary and you were making $100,000 a year, they’d contribute as little or as much as you do, but no more than $4,000 total.
What should I look for in a 401k plan?
Overall, you want to look for an employer that offers 401k matching — and the higher the maximum amount your employer is willing to match, the better. And if you’re comparing two plans that have the same maximum match amount, go for the dollar-for-dollar match over the partial match, since it’ll take you less contributions to get more money from your employer.
Another thing to watch out for is a vesting period. Similar to equity compensation, some employers will make you wait a certain time period to “vest,” or give you ownership over, the matching amount.
And finally, the FAANG 401k Ranking
Since plans vary widely by structure, salary and tenure, we’ve created our rankings assuming a $150,000 base salary, typical for a mid-level software engineer at a FAANG company (ICT3 at Apple/SDE II at Amazon/L4 at Google/E4 at Facebook). Keep in mind that while this list can provide a base comparison, you’ll want to evaluate each plan based on your own circumstances to make sure that you’re getting the best bang for your buck.
5. Amazon
- âś… Multiple plan options: Roth 401k, Backdoor/Mega Backdoor
- ❌ Immediate vest
- Employer match: 50% match on up to 4% of base salary
Overview
While Amazon offers a 50% match on up to 4% of your salary, the vesting period isn’t immediate. You have to wait until you’ve had “three years of vesting services” to get Amazon’s contribution. To earn a year of “vesting service,” you’ll have to work at least 1000 hours within a calendar year, which is a little more than 6 months. That means that at the very minimum, you’ll need to work at Amazon for a bit more than 2.5 years to get that 401k contribution. The low match amount (a maximum of 2% of your salary) and vesting period put Amazon in last place for our 401k ranking.
4. Apple
- âś… Multiple plan options: Roth 401k, Backdoor/Mega Backdoor
- âś… Immediate vest
- Employer match: 50-100% match up to 6% of base salary, based on tenure
Overview
Apple offers matching on up to 6% of your salary, with the match percentages varying based on how long you’ve worked there. If you’ve worked there for less than two years, you’ll get a 50% match, for a maximum of 3% of your salary. From 2–5 years of employment at Apple, they’ll match 75% of your contributions, maxing out at 4.5% of your salary. And after 5 years, you’ll get a 100% match on 6% of your salary. While Apple’s 100% match on up to 6% is quite generous, let’s be honest — not many people in tech stay at a company for that long (though Apple does have a higher average tenure than most).
3. Google
- âś… Multiple plan options: Roth 401k, Backdoor/Mega Backdoor
- âś… Immediate vest
- Employer match: 100% up to $3,000 or 50% up to $9,500
Overview
Google offers both a traditional and Roth 401k, as well as a generous matching program with immediate vesting. Google will match the greater between (a) 100% of your contributions up to $3,000 or (b) 50% of your contributions up to $9,500. That means that Google will give you up to $4,750 a year for your 401k, assuming you contribute $9,500 yourself. Note that Facebook and Google have somewhat similar 401k plans for entry-to-mid level base compensation, but Facebook gets a leg up when evaluating the plans with a $150,000 base salary. One caveat: If you’re entry-level or otherwise making less money, Google might be the better bet — a 100% match for up to $3,000 and maximum match based on a dollar amount will be better for you.
2. Facebook
- âś… Roth 401k
- âś… Backdoor or Mega Backdoor
- âś… Employer matching
- âś… Immediate vest
- 401k matching plan: 50% match on up to 7% of base salary
Overview
Facebook will match 50% of your contributions, up to 7% of your salary, and you won’t need to wait for that amount to vest. In total, Facebook will contribute a maximum of 3.5% of your total salary, assuming you contribute 7% yourself. Note that Facebook and Google have somewhat similar 401k plans for entry-to-mid level base compensation, but Facebook has a higher maximum match at a $150,000 base salary. Overall, we’d choose Facebook over Google if you have a fairly high base salary.
1. Netflix
- âś… Roth 401k, Backdoor or Mega Backdoor
- âś… Immediate vest
- Employer match: 100% match on up to 4% of base salary
Overview
Netflix has one of the best 401k plans out there. They offer dollar-for-dollar (100%) matching on up to 4% of your salary, no vesting or years of service needed. The high maximum contribution percentage, no wait time, and dollar-for-dollar match makes Netflix our top choice out of FAANG 401k plans. This comes at no surprise, though — Netflix consistently makes our yearly Highest Paying Companies list for senior roles due to its superb compensation and benefits.
Bonus: Microsoft
- âś… Multiple plan options: Roth 401k, Backdoor/Mega Backdoor
- âś… Immediate vest
- Employer Match: 50% match up to the IRS maximum
Overview
Microsoft isn’t technically a FAANG, but its 401k plan, shared with child company LinkedIn, is worth calling out. They’ll match 50% of your contribution up to $19,500, the maximum yearly contribution amount set by the IRS. That’s a maximum of $9,750 in free money a year with no limits based on your salary. For comparison, you’d need to make a base salary of $243,750 at Netflix to get that much money matched (though Netflix does dollar-for-dollar matching, which is better than Microsoft’s 50% match).