American savers leaving $24 billion on the table

Americans are saying "no, thanks" to an average of more than $1,300 each year that their employers want to contribute toward their retirement savings. That adds up to more than $24 billion each year going down the drain.

Those estimates come from Financial Engines, which provides investment and retirement planning advice to 401(k) participants. Examining the savings records of 4.4 million retirement plan participants in the U.S. at 553 companies, the firm found that 1 of 4 employees weren't contributing the maximum amount to their 401(k) plan that could be matched by their employer.

Workers missed out on an average of $1,336 in annual matching funds. In its study, Financial Engines found that more than 1 million employees left more matching contributions unclaimed, at $1.4 billion, than claimed ($1 billion).

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Financial Engines estimates that if a 45-year-old worker begins to make the maximum 401(k) contribution and that amount is matched, after 20 years he or she would have an additional $42,885 in retirement savings. For younger savers, the additional amount is much higher. A 25-year-old could add as much as $142,270 in savings by age 65.

But these amounts just count the lost employer match. If you also count the employee contribution that's needed to receive the matching contribution, the additional accumulated savings would be far higher.

Predictably, Financial Engines found that younger employees and those with low incomes were the most likely to leave matching contributions on the table. These workers are the most likely to be strapped by current living expenses and persuaded by media and advertising messages to spend all their money rather than save for their future retirement years.

Retirement plan sponsors could help workers accumulate more retirement savings by implementing automatic enrollment and auto-escalation features in their 401(k) plans. These features have repeatedly been demonstrated to increase savings levels.

Is it possible to retire at 65?

As an employee, the first step you can take is to learn how much you need to contribute to maximize your employer's contribution. If you can't afford to increase your contribution to that amount all at once, then increase your annual contribution by 1 percent of pay. For most workers, this small amount won't force you to cut back on discretionary spending. Then, every six months, increase the amount you contribute until you're realizing the maximum matching contribution.

Can workers fit these increases into their budgets? For many people, the answer is yes. In the 2015 Retirement Confidence Survey from the Employee Benefit Research Institute, roughly 7 of 10 workers reported that they could save $25 more each week if they really wanted to -- that adds up to $1,300 per year. The most common matching amount reported by Financial Engines was 100 percent, so adding up the extra worker and employer match could increase retirement savings by $2,600 per year.

Bottom line: It's just smart to do what you must to receive the maximum matching contribution from your employer. So find the motivation to make it happen -- your future self will thank you.

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