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American employees miss out on average $1,300 annually, report says
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American workers are leaving an average $1,336 each year on the table by not contributing enough money into their company's 401(k) savings plan to get the "free money" that comes from the employer's matching contribution, according to a report by Financial Engines.

Financial Engines looked at the saving records of 4.4 million retirement plan participants at 553 companies to find if Americans were taking advantage of their company's 401(k) match, which is used as an incentive to get employees to contribute to their retirement savings plan.

They found that one in four employees miss out on receiving the match simply by not contributing enough of their paycheck toward the company savings plan. The $1,336 employees are leaving behind as a result would be an extra 2.4 percent of annual income for the average employee.

"People who don't know how much to stash in their retirement accounts are told often by financial advisers to at least save enough in their retirement plans to receive the full company match," the Washington Post reported.

But how much needs to be saved to qualify for the match depends on the employer, the Post said.

So why aren't people taking advantage of this free money?

"Employees tend to save more for retirement as they age and earn more money," wrote Mike Jurs in an analysis of the report.

"For many employees, middle age poses additional savings challenges. We found that the steady decline in employees missing out on their match is interrupted between ages 35 and 45, when the rate of decline flattens," he wrote.

The survey did not explore why the savings dip occurs, "it may have to do with the growing costs of raising a family, saving to send kids to college or buying a home," Jurs wrote.

There are people who simply cannot afford setting aside the amount that will get them the full match. Some 42 percent of employees who earn less than $40,000 a year are not taking full advantage of the match., while only 10 percent of employees who earn more than $100,000 a year miss out, the report found.

Jurs shared four tips to help people not only receive extra money, but a way to help with retirement security:

  1. Know your plan. Find out how much you need to contribute to your 401(k) to receive the employer match, and try to reach at least the minimum to get the full match.
  2. Get professional help. If you can access professional investment help online, do it. Look into online advice and/or managed accounts.
  3. Ask a financial adviser. Talk with somebody who has the legal commitment to, and will, put your interests ahead of their own.
  4. Commit to save more when you can. If you can't afford to save enough for the full match right now, increase the amont you put forth for savings each time you get a raise until you can reach the contribution level that will reward you.
The 401(k) match is one of the best deals going for employees, providing an immediate 100 percent return per dollar invested," said Greg Stein, Financial Engines director of investment technology.

"Maximizing your available 401(k) match is a key way for millions of American employees to improve their retirement security. While many people might feel like they cant afford to save more, we hope that these numbers help them realize that they cant afford not to.
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