A 401(k) matching plan is one of the most valuable — and overlooked — benefits an employer can offer. Imagine your boss handing you thousands of dollars every year — that’s essentially what can happen when they match your contribution.
Astonishingly, four in 10 American workers with a 401(k) aren’t leveraging their employer’s matching contributions, according to CNBC’s Your Money Survey.
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That leaves a lot of money on the table when it comes to the average American’s retirement savings, and simply underestimates the long-term impact of those dollars.
Think of it this way: a 401(k) match is essentially free money your employer sets aside specifically for your retirement. Sure, it requires a bit of budgeting on your part, but wouldn’t you grab a few extra thousand dollars a year if your boss offered it to you?
Will 3% make a dent?
Consider this scenario: You're a middle-aged professional who's spent years in the workforce but only recently started contributing to a 401(k). Your employer provides a common matching benefit: 50% match on contributions up to 6% of your salary.
You're motivated to save enough to make a meaningful difference, but you're also hesitant about contributing heavily, questioning whether you can afford it now and whether it will matter much, given your late start.
Should you contribute the 3% you can afford even if you won’t get your employer’s full match?
Absolutely, yes. By not contributing anything, you're essentially turning down free money — money that could significantly boost your retirement savings.
With a 50% match up to 6% of your income, you’d have to contribute 6% on your end to get the full benefit. Contributing 3% leaves some money on the table, but it’s better than nothing.
Even if you’re in your 50s, contributing this modest amount can yield significant benefits. Thanks to compound growth, even 10 to 20 years of investing at a modest rate can dramatically boost your retirement nest egg. And if you're over 50, you're eligible to make additional catch-up contributions, further padding your retirement funds.
Let’s say you’re 55 and make $80,000 a year. If you contribute 3% or $200 of your pay each month, your employer will match 50% of that with $100, making your total monthly contribution $300.