Many Americans are unaware of key workplace benefits, including 401(k) matching. Married couples in particular could be missing out on about $757 a year by not fully using these benefits.
401(k) matching explained
Some couples are missing out on about $757 every year because they are not fully using their employer 401(k) matching benefits. This “missing money” is basically free cash that employers are ready to add when workers save for retirement.
Many full-time workers have a 401(k) retirement account where part of their salary is automatically saved for the future, The Sun explained. Employers often boost this savings by adding extra money, called a “match,” when employees contribute to their 401(k).
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Types of 401(k) employer match
There are three main types of employer matching: dollar-for-dollar, partial match, and tiered match. In a dollar-for-dollar match, the employer adds the same amount the worker puts in, such as $1 for every $1 saved.
In a partial match, the employer may add less, like $0.50 for every $1 or a smaller percentage of the employee’s contribution.
In a tiered match system, the employer may fully match a part of the contribution and then partially match the rest, as explained by The Sun.
Study shows couples losing free money
A study by the Center for Retirement Research at Boston College found that around 1 in 5 married couples do not fully use these matching benefits. Because of this mistake, couples are losing an average of $757 per year in free retirement money, as per The Sun. Over time, this small yearly loss can grow into $60,000 to $100,000 less at retirement due to compound interest over the long term in retirement savings.
Why couples miss out on retirement match
Experts say the main problem is not low savings, but poor coordination between spouses who treat retirement planning individually instead of as one household, according to Jeff Judge of Chesapeake Financial Planners via The Sun. Jeff Judge also said many couples miss out because they do not compare which spouse has the better employer match and fail to optimize contributions.
Evan Potash from TIAA Wealth Management said in the report by The Sun, many people simply do not realize they are missing out on full employer contributions. The study also found that couples who manage money together—like sharing accounts, mortgages, or planning for children—are less likely to miss out on this yearly $757 benefit.
