Are you leaving money on the table? How 1 in 4 couples are missing out on 401 (k) savings

Imagine a young married couple. One partner invests heavily in his employer’s 401(k), saving for both spouses. The other focuses on paying the bills and contributes nothing to her retirement plan, missing out on the employer's matching funds.

That was how Niv Persaud and her husband handled their finances.

“My income was going toward our expenses, and he was going to focus on retirement,” she said. “And I had a great company match, and I didn’t pay attention to that.”

The marriage eventually ended. Three decades later, Persaud works as a certified financial planner in Atlanta. Her lost retirement savings provide a cautionary tale.

How much potential savings did she lose?

“I don’t even want to think about it,” she said.

Married couples don't maximize 401(k) matching options

Niv Persaud, a certified financial planner in Atlanta, missed out on 401(k) retirement savings years ago by failing to claim matching funds from her employer.
Niv Persaud, a certified financial planner in Atlanta, missed out on 401(k) retirement savings years ago by failing to claim matching funds from her employer.

In fact, 1 in 4 married couples fails to take full advantage of employers who make matching contributions to 401(k) retirement plans, a recent study found. The oversight costs them nearly $700 a year, on average.

Nearly two-thirds of American workers have access to an employer-sponsored defined contribution retirement savings plan, according to the paper, titled “Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples,” and released in April by the National Bureau of Economic Research.

Most plans offer a match: The employer contributes to a 401(k), matching some or all of the funds paid into the plan by the worker. In one typical model, the employer matches half of every dollar a worker contributes, up to a maximum of 6% of the worker’s pay.

The study found that about 24% of married couples left money on the table by failing to claim some of an employer’s matching funds. Those couples lost $682 a year, on average, money they could recover simply by changing the allocation of their retirement contributions. The findings are based on IRS tax data and retirement plan descriptions.

“There’s a lot of advice around, ‘You should save more,’” said Taha Choukhmane, an assistant professor of finance at the Massachusetts Institute of Technology Sloan School of Management. “It’s not just how much you save. It’s how you save, and where you save.”

Choukhmane co-authored the working paper with Cormac O’Dea, an assistant professor of economics at Yale, and Lucas Goodman, an economist at the Treasury Department.

The researchers stressed that their focus was not on couples that don’t save for retirement, or don’t save enough. Instead, they looked at couples that could increase their savings merely by shifting contributions from one spouse to the other.