1 in 3 workers who use a 401(k) could boost their retirement savings by making a simple change

"I would urge people to bucket this into their 'essential expenses' side of the budget."


A lot of Americans are missing out on free money at work, according to new data from Vanguard. A third of participants, or 1 in 3 people enrolled in Vanguard retirement plans, didn't contribute enough to get their full company match in 2020, according to the provider's How America Saves 2021 report.

Moreover, a recent MagnifyMoney poll estimates that among workers currently saving in an employer-sponsored retirement plan, 12% are missing out on matching funds. So, while many people were able to maintain or increase their contributions during the pandemic, some still aren't taking full advantage.

Companies typically offer an employer match, meaning they'll contribute a certain amount of money to your account based on how much you put in, as an incentive for workers to save. Most plans match between 3% and 6%, with a median value of 4% of your pay, according to Vanguard. A worker with a $50,000 annual salary who misses out on a 4% match, for example, would be forgoing $2,000 that could be growing for their retirement.

"At the very least, try to take advantage of any company match," says Ben Smith, a certified financial planner and the owner of Cove Financial Planning.

What is a 401(k) match and how can you take advantage of it?

Video by Ian Wolsten

How to get on track with your retirement savings

About a third of people in MagnifyMoney's poll, 35%, who didn't contribute said it was because they couldn't afford to. Another combined 26% said they forgot to enroll in their job's plan, don't know how it works, or aren't sure how to get started.

It can be helpful to remember that, because traditional 401(k) contributions are taken out before taxes, they'll take less of a bite out of your take-home pay.

And because it's so important to prepare for the future, some experts advise including retirement savings into your regular budget as a fixed expense. "I would urge people to bucket this into their 'essential expenses' side of the budget," Smith says, and "consider this a necessary cash outflow just like rent, mortgage, and utilities."

Look for ways to increase your savings gradually

If you can't afford to contribute enough to earn the full match, consider scaling up over time. Any time you get a raise, for example, you might use a portion to boost your contributions.

Doing so can make a big difference over decades of compounding. Take the example of a 25-year-old earning $50,000 a year at a company with a 5% employer match. If they contribute 3% now and gradually scale up to 10%, they could have $1.4 million by 65, according to calculations from J.P. Morgan. That's assuming 2% annual wage growth and a 5.75% annualized return on investment after fees.

Meanwhile, someone who contributed 10% from the start and earned a 5% match could amass $1.5 million, according to the calculations.

If you can't afford to bump up your contributions, focus on saving what you can consistently. Even contributing just 1% "can make a big difference in your balance when you retire," Jessica Macdonald, vice president of Thought Leadership at Fidelity Investments, previously told Grow.

Look for ways to cut back on spending, too, adds Smith: "If you are struggling to find the cash to save each month, look very closely at past credit card or bank account statements and highlight expenses that you could easily cut in order to make room for your retirement savings."

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