A survey by TIAA-CREF shows that 78% of Americans who contribute to an employer-sponsored retirement plan receive matching contributions from their employer, and 77% of those who have matching contributions save enough to receive the full employer match.

However, only 72% of women contribute enough to receive the full employer match, compared with 82% of men, and only 64% of those earning less than $35,000 a year receive the full match.

“These survey results show that some groups of people in particular aren’t maximizing the full value of their retirement plan,” says Teresa Hassara, executive vice-president of TIAA-CREF’s institutional business. “When employees don’t get the full match that their employers offer, they are essentially walking away from free money.”

Employees say they would welcome more information from their employers on making the most of their retirement plan match.

Forty percent of the employees who are not currently contributing enough to get the maximum matching funds from their employers said they get reminders to do so and are happy to receive them. An additional 32% don’t receive reminders from their employer but said they wish they did.

“Plan sponsors must ensure they are communicating the benefits of the match to employees, particularly those who are not currently reaching the full match,” she says. “Their communications should be targeted to various groups’ unique financial needs.”

For low earners, plan sponsors can explain the inherent benefits of saving for retirement and position the matching contribution as part of a larger focus on long-term financial well-being.

For women, more information about the match may be effective: of those not receiving the full match, 17% of women (compared with 10% of men) said that more information about how the match works would make them consider increasing contributions.

TIAA-CREF asked survey respondents how much they would earn from a 3% employer match. In the example, the match would be worth US$72,518 by the time they were 65. However, 32% of respondents thought it would be worth less than $50,000. Women, gen Y respondents and those earning less than US$35,000 a year were even more likely to underestimate how much the employer contributions will translate into retirement.

“Getting the full employer match on retirement savings, even if the percentage doesn’t seem like a lot on paper, can have a significant impact on the total value of an employee’s savings by the time he or she retires,” Hassara explains. “Providing employees with more concrete examples like these can really underscore the importance of increasing their contributions to maximize their match.”

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Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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