A new report estimates that American workers are likely to walk away from a total of $24 billion in free money each year — in the form of unclaimed 401(k) company matches.
The report from Financial Engines puts it this way: “If your boss wanted to give you a $1,300 bonus on the spot, you’d take it, right?”
Financial Engines said it arrived at this figure by reviewing the saving records of 4.4 million retirement plan participants at 553 companies.
“We found that one in four employees (25%) miss out on receiving their full company 401(k) match by not saving enough on their own,” writes Mike Jurs for Financial Engines. “The typical employee who fails to receive the full match leaves $1,336 of potential ‘free money’ on the table each year. For the average employee, that’s an extra 2.4% of missed annual income.”
It doesn’t stop there. With compounding, this lost opportunity could amount to as much as $42,855 over 20 years.
Older Workers, Higher Earners Save More
The report finds that employees tend to save more for retirement as they age and earn more money.
For example, 42 percent of 401(k) plan participants earning less than $40,000 per year do not take full advantage of their employer match. That compares to just 10 percent of employees who earn more than $100,000 annually. Similarly, employees under age 30 are about twice as likely to miss out on their employer match, compared to employees over the age of 60 (30 percent vs. 16 percent).
The Financial Engines report also found that employees — across all ages and income levels — who used advisory services were less likely to miss out on any of their employer match compared to those not receiving this help. For example, 25 percent of employees who earn less than $40,000, and who use professional advisory services, missed out on part of their employer match, compared to 44 percent of people who did not use advisory services.