If you’re lucky enough to receive a match for your retirement plan contribution, you’ve got a good thing going. Not contributing enough to receive the match is basically leaving money on the table.
However, that’s just what some retirement savers are doing. Specifically, women and low-income workers are leaving cash behind.
A recent TIAA-CREF survey found that 78% of Americans who contribute to an employer-sponsored retirement plan receive matching contributions from their employer. However, only 72% of women contribute enough to receive the full employer match, compared with 82% of men. Only 64% of those earning less than $35,000 a year receive the full match. The survey polled more than 1,000 U.S. adults about their retirement plans.
“These survey results show that some groups of people in particular aren’t maximizing the full value of their retirement plan,” said Teresa Hassara, executive vice president of TIAA-CREF’s Institutional Business. “When employees don’t get the full match that their employers offer, they are essentially walking away from free money.”
Part of the reason for the lack of contributions is the fact that many retirement savers do not fully understand how beneficial a match can be to the health of their account. Depending on how much the employer gives, contributing enough to get a match could provide a significant boost to your nest egg.
For example, TIAA-CREF asked survey takers how much they would earn from a 3% employer match. In the example provided, the match would be equal to $72,518 by the time the respondent reached 65 years of age. However, about 32% of respondents erroneously guessed it would be worth less than $50,000. The survey found that women, millennials, and workers earning less than $35,000 a year were more likely to underestimate how much the employer contributions would translate into retirement.