“American workers forfeit an estimated $24 billion a year by not contributing enough money to their company 401(k) plans to capture their employer’s full matching contribution.”
Mary Beth Franklin, Investment News, “Help investors plug the $24 billion retirement savings leak,” May 12, 2015
Yes, that’s $24 billion with a “B.”
And some of that money could be yours if you’re too stingy with your own 401(k) contributions. That’s a common mistake of millennial workers.
Take a moment to check your latest 401(k) statement. If you don’t contribute enough to earn your employer’s maximum “match” (and that percentage will vary company to company), you’re passing up free money.
Here’s some facts to consider:
The typical worker forfeits $1,336 a year in lost 401(k) employer matches. In the aggregate, that adds up to $24 billion of lost money each year.
A full 25% of employees miss out on receiving the full company 401(k) match, according to research by investment firm Financial Engines.
At many firms, you need to contribute 6% of salary to earn the full match, so that means that about 25% of workers contribute less than that amount. However, be aware that to be truly prepared for retirement, you should be contributing from 10% to 15% of salary from the get-go.
When you get the full employer match, you’re earning up to a 100% return on your own dollars. What could be better than that?? (For example, if you put in 3% of your salary, and they match it 100%, you’ve doubled your money right off the bat).
Who’s at greatest risk of leaving employer money on the table? Young workers under age 30 and those at lower salary levels, two groups that can benefit enormously by fully participating in their 401(k)s. Younger people have more time for their savings to compound and grow, and lower income workers need to supplement Social Security with their own workplace savings to guarantee a secure retirement.