Missing an employer match could hurt your retirement goals

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Taking more money from your boss can be as simple as re-evaluating your 401 (k) contribution.

Even though workers are saving more for retirement, many still lack free money in the form of matching contributions from their business.

“Do you want your employer to give you a raise? ”Asked Kevin Meehan, a certified financial planner and regional president of the Wealth Enhancement Group in Itasca, Illinois. “Well, here’s a way to get it without having to ask, because your employer has already volunteered. “

One in five workers does not contribute enough to get full compensation from their employer, according to data in an upcoming report by benefits administrator Alight Solutions, which assessed the behaviors of 3.5 million workers at 125 companies who are eligible to participate in their work plan. Fidelity, which calculated the figures for CNBC on 2.6 million participants in 6,295 plans, arrived at the same figure.

Young workers and those with lower wages are more likely to miss the game, but the trend persists even among those who are older or well paid. (See tables below.)

A new analysis from Wells Fargo has found that a quarter of baby boomers aren’t saving enough in their retirement account at work to get the full amount. For Generation X, it’s 31% and Millennials it’s 37%. The bank has analyzed the habits of 4 million workers in more than 5,000 plans.

Employee savings by age

Employee’s age Below the match threshold At the match threshold Above match threshold
20-29 29% 38% 34%
30-39 25% 34% 41%
40-49 21% 29% 50%
50-59 16% 25% 58%
60+ 14% 26% 61%

Some of these workers are just below the mark.

Fidelity estimates that 20% of missing people are only a percentage point below a full match. Wells Fargo estimates the average value of the lost match at $ 750 per year. Over the course of a career, even a small annual loss could be almost $ 100,000 less in your retirement account.

“At first glance, people might say, ‘It’s not a lot’, but when you think about it over 40 years… it really does sound a bit,” said Joe Ready, executive vice president and general manager of Wells Fargo Institutional Retirement and Trust. .

So why are workers leaving free money on the table? Experts say several factors could be at play, including competing debts and the goals for those paycheck dollars.

“A number of people just don’t have the personal cash flow to contribute, period,” Meehan said.

Employee savings by income

Salary Below the match threshold At the match threshold Above match threshold
$ 20,000- $ 39,000 35% 35% 30%
$ 40,000 to $ 59,000 26% 33% 41%
$ 60,000- $ 79,000 20% 31% 50%
$ 80,000 to $ 99,000 14% 29% 57%
$ 100,000 + 8% 22% 69%

Consumers could also miss out because they don’t know the key details of the plan. About half of employer plans that automatically enroll eligible workers put them at a lower contribution level than a full match, said Rob Austin, research director at Alight Solutions. Many of these plans increase contributions over time, but not all of them.

Another failure: Some plans allow both pre-tax and Roth contributions, but only match pre-tax contributions, Austin said.

Money found

If you can afford to contribute, there is no reason to leave this employer on the table. Even if the game isn’t particularly generous – say 25 cents on the dollar – “it’s still a guaranteed 25% return on your investments right away,” Austin said.

Here’s how to make sure you get all the free money available:

Confirm the details of the match. “Make sure you get the full amount,” Austin said. This is easy to confirm with a call or email to Human Resources or your plan administrator.

Reassess your budget. Take a personal inventory of your spending to see where you could save money or cut back, Ready said. A recent Banktivity survey found Americans wasting an average of $ 140 a month on things they don’t necessarily need.

Create an escalation plan. If you can’t afford to increase your contributions yet, check to see if your plan allows you to plan for a raise or enroll in an annual raise program, Austin said. Make that coincide with your next raise.


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