I recently read an article that said that one of the 401(k) advisor firms did a study which indicates that US workers are not taking full advantage of company matches for their 401(k) plans resulting in US workers missing out in at least $24 billion in retirement plan contributions. That is billion with a “B”. The missed amounts ranged from less than $100 for the lower paid to more than $20,000 for the higher paid, depending on how much the company’s plan would match. One in four employees who participated in the retirement plans missed out on some or all of the benefits, and the average missed out on was $1,336 per year. And this number is not the full picture because it did not capture those workers who did not contribute to the company retirement plan at all.
So what is your excuse? According to the Employee Benefit Research Institute, about half of American workers have access to a retirement plan and just under 41% of them participate in them. Most companies that have 401(k) plans do match employees’ contributions. The most common is one dollar for each dollar workers contribute up to 6 percent of annual pay. The next most common is 50 cents for every dollar up to 6 percent of annual pay
So, why are you missing out? It seems that the two groups of workers who are most likely to miss out are younger workers and lower paid workers. And the younger workers group is even more impacted because the money they are missing out on would have had a longer period of time to compound, thus resulting in even more money. We understand that lower paid workers feel the stress of needing money to just make ends meet. But I would wager that there is a significant of those lower paid workers who could afford to contribute at least something to their 401(k) if they would just start doing so.
The dollar amounts are significant. Some employers have adopted the automatic enrollment in their retirement plan which has increased worker’s participation. Other employers have tried providing better information to their workers to educate them about the plan and the company match. Assuming that your company has a plan, that it has a company match, and that you have been made aware of it, look inside yourself and ask why you are not participating at all, or why you are not participating to the extent to allow you to gain the most benefit.
