If you are not putting enough money in your 401(k) to get the maximum employer match, you are absolutely leaving free money on the table.
- 29% of all workers do not contribute enough to their 401(k) to get the full company match.
- 43% of workers in their 20s do not put enough in to get the full match (source: Aon Hewitt study).
Here’s an example. Let’s say your company matches 50% of your contributions, up to 6% of salary (a commonly reported formula among U.S. companies). You earn $50,000 and contribute 6% or $3,000. Your company throws half of that, or $1,500, into the pot.
Your $3,000 is now worth $4,500. That’s a 50% return, about 25 times the return you would have earned last year by investing in the U.S. stock market, and 50 times the return you would have earned from a money market account or CD. Not bad for a few minutes work!
So, take 5 minutes to check your company’s policy on matching 401(k) contributions. You can find this info online or by asking the HR department. Review your contribution level and change what you contribute, if necessary, to make sure you capture the full company match.