A recent FINRA survey finds a whopping 43% of young adult 401(k) participants ages 20-29 aren’t taking advantage of their employer’s company match. Overall, 29.4% of 401(k) participants aren’t using the match, which is a shame since that’s a huge waste of free money.
Your employer match is the easiest way to build up your savings for retirement, enabling you to “match,” or put away, up to 3% of your salary, dollar-for-dollar, says FINRA. The investing site gives the example of saving $84,000 for retirement as opposed to a mere $42,000 to demonstrate this a no-cost way to boost your nest egg.
There are tax benefits as well. Traditional 401(k)s are funded with pre-tax dollars, meaning the money goes into the piggy bank before taxes, and since contributions made by an employer are tax-deferred, they will only be taxed when you break the bank to start funding your retirement.
With these pre-tax contributions, you’re essentially building up your income without increasing your taxable income, says FINRA. It’s almost like being rewarded for saving. For example, “the $1,200 you contribute to a traditional 401(k) lowers your federal income tax bill for the year because you owe taxes on only $38,800 rather than $40,000.” In fact, it will hardly hurt your paycheck at all.
Of course, a company match isn’t the only ticket to a surefire retirement, but it’s certainly one way to help you get there. Consider this the next time you gloss over that HR paperwork and feel too “lazy” to take on free money.
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