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One Quick Fix That Can Boost Your Retirement Savings

If your retirement strategy involves putting money into a 401(k), you want to make sure you’re getting the most out of what you’re saving. Choosing low-fee investments is a step in the right direction, but there’s a faster way to grow your money. Bumping up your contribution amount so you qualify for the company match can yield a big payoff when you’re ready to retire.

Check out our 401(k) calculator.

How Employer Matching Contributions Work

As an incentive to get employees to participate in their 401(k)s, employers might agree to match part of their workers’ contributions. According to the Plan Sponsor Council of America, companies contribute an average of 4.5% of pay toward participating employees’ plans, although some will match you on a dollar-for-dollar basis. You have to contribute a minimum amount to get the match, but essentially it’s free money that’s just waiting to be scooped up.

What You’re Missing out on When You Don’t Get the Match

One Quick Fix That Can Boost Your Retirement Savings

You’d think that any financially savvy employee would jump at the chance to get a matching contribution, but that’s not the case. Surprisingly, one in four workers didn’t take advantage of the match in 2014 and the result was a substantial loss of potential earnings. According to Financial Engines, a financial services advisory firm, workers leave a whopping $24 billion on the table each year.

Related Article: 5 Worst Moves You Can Make With Your 401(k)

Financial Engines found that the average worker who doesn’t take advantage of a 401(k) match loses out on $1,336 per year. Over 20 years, you could shortchange your nest egg by as much as $42,855. That’s a pretty steep price to pay in exchange for keeping a few extra dollars in your check each pay day.

How Much Do You Need to Save?

Pinning down how much you need to be socking away for retirement is no easy feat. It ultimately comes down to how much you’re making now and what you expect your expenses to be when you leave the workforce for good. Our retirement calculator can tell you exactly how much you’ll want to put away.

You don’t want to make the mistake of low-balling yourself. If your employer only requires you to save 3% of your pay to get the match but you can afford to save more, there’s no reason not to.

Find out now: How much should I save for retirement?

When You Can’t Contribute the Full Match

One Quick Fix That Can Boost Your Retirement Savings

If you’re just starting out in your career and you’re trying to pay off student loans or other debts on a modest salary, saving enough to get the match may not be possible right away. You can, however, work your way up to it without putting any extra strain on your wallet.

By checking with your plan administrator, you can see if your 401(k) has an automatic savings option that allows you to increase your contributions by a half or full percent each year. If you get a raise or you’re able to trim your expenses as you pay down your debts, there’s a good chance you won’t miss the extra money that’s coming out of your paychecks.

Don’t Set It and Forget It

Putting your 401(k) on autopilot takes a lot of the hassle out of saving, but it can backfire if you’re not keeping tabs on your investments. It’s a good idea to review your portfolio as often as possible to make sure you’re not paying too much in fees. You can also check to see whether you’re on track to hit your annual contribution goal and adjust how much you’re saving as your salary climbs. And don’t forget to update the beneficiary forms for your retirement plans regularly. You don’t want all that money you worked so hard to save going to the wrong person if something happens to you.

Photo credit: ©iStock.com/mbbirdy, ©iStock.com/eyetoeyePIX, ©iStock.com/DragonImages

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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