Many Americans are unaware of important workplace benefits, including 401(k) matching. Married couples, in particular, could be losing out on approximately $757 a year if they don’t take full advantage of these benefits.
401(k) Match Explained
Some couples lose about $757 a year because they don’t take full advantage of their employer 401(k) matching benefits. This “missing money” is essentially free cash that employers are prepared to add as workers save for retirement.
Many full-time workers have 401(k) Retirement The Sun explains that a portion of their salary is automatically saved into the account for future use. When employees contribute to a 401(k), the employer often increases savings by adding additional funds, called a “match.”
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Types of 401(k) Employer Match
There are three main types of employer matches: dollar-for-dollar, partial, and tiered matching. in a dollar to dollar When matching, the employer adds the same amount that the worker put in, such as $1 for every $1 saved.
In a partial match, the employer may contribute a reduced amount, such as $0.50 per $1, or a smaller percentage of the employee’s contribution.
As The Sun explains, in a graduated matching system, an employer might fully match part of the contribution and then partially match the rest.
Study shows couples losing out on free money
A study from the Center for Retirement Research at Boston College found that about 1 in 5 married couples don’t take full advantage of these matches benefit. According to The Sun, couples are losing an average of $757 in free retirement benefits each year due to this mistake. Over time, this small annual loss could add up to $60,000 to $100,000 less in retirement due to the long-term compounding of retirement savings.
Why couples are missing out on the retirement game
Experts say the main problem isn’t low savings rates but a lack of coordination between spouses who plan for retirement individually rather than as a family, Chesapeake financial planner Jeff Judge said via The Sun. Jeff Judge also said many couples miss out on this opportunity because they don’t compare which employer is a better match and fail to optimize contributions.
Evan Potash of TIAA Wealth Management told The Sun that many people simply didn’t realize they were missing out on the full contribution from their employer. The study also found that couples who manage money together, such as sharing accounts, mortgages or planning to have children, are less likely to miss out on the $757-a-year benefit.
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