You wouldn’t turn down a pay raise at work, right? Yet chances are you could be leaving free money on the table at your employer.
A recent FinancialEngines.com survey finds that 1 out of every 4 people don’t pick up the full company match in their company’s retirement savings plan. And that’s effectively like turning down free money — $1,300 on average each year, according to the survey!
New study finds things are getting better
A new report from benefits firm Aon-Hewitt finds that 42% of companies are now offering employees a dollar-for-dollar match in their 401(k). That’s up from 31% of companies asked in 2013. (Prior to 2013, most companies were only do 50 cents on the dollar.)
Some companies automatically enroll employees in their 401(k) plan. Among those companies, more than half are now setting 4% as the default savings rate. That’s up from only 39% of companies that did 4% as the default back in 2013.
Four percent is a good start, but it won’t get the job done. If you want a really comfortable retirement, you’re going to need to save at least a dime (10%) out of every dollar you make.
Don’t leave money on the table!
The beauty of an employer match is that it’s the equivalent of an automatic pay raise. No need to ask your boss, get a good quarterly review or hope your company has a good year so there’s money for a raise!
If you are among those people do not put in enough money to get the full match from an employer, you need to go through a re-evaluation in your own head. Tell yourself, ‘I’m doing a good job, so I deserve a raise. And my employer will just nod and agree!’ Then simply change your contribution rate — either during open enrollment or any other time when you’re allowed to — to pick up the full company match.
The most common rationale for turning down free money is, ‘I can’t afford to save any of my paycheck because…’ Yet the reality is that except for those living below the poverty line, the way we spend at least a portion of our money is really a matter of choice. There are always things we do with money that are discretionary.
So why not change your discretionary spending habits so you can invest in yourself and get an automatic pay raise?!
Don’t be intimidated by the whole process. Our investment guide will walk you through the process of saving for your future. Remember, if you don’t save for retirement, it doesn’t get done.
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