Americans leave an estimated US$24 billion in unclaimed 401(k) company matches on the table each year, finds a Financial Engines report.
Twenty-five percent of retirement plan participants miss out on receiving the full company 401(k) match by not saving enough.
The typical employee failing to receive the full match leaves US$1,336 of potential free money on the table each year, which equates to an extra 2.4% of annual income not received. With compounding, this could amount to as much as US$42,855 over 20 years.
Read: Why don’t plan members take free money?
According to Aon Hewitt, 92% employers with 401(k) plans match employees’ 401(k) contributions, with the most common scenario being one dollar for every dollar the employee contributes up to 6% of the employee’s annual salary.
“The 401(k) match is one of the best deals going for employees, providing an immediate guaranteed return per dollar invested,” says Greg Stein, director, financial technology at Financial Engines.
Lower-income and younger employees were much more likely than others to miss out on at least part of their employer matching contribution.
For example, 42% of plan participants earning less than US$40,000 per year don’t take full advantage of the employer match, compared to just 10% of employees earning more than US$100,000 annually. Likewise, employees under age 30 are about twice as likely to miss out on the employer match compared to employees over the age of 60 (30% vs. 16%).
The report examined the saving records of 4.4 million retirement plan participants at 553 companies.
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