How Much Money Does The Average American Make

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If someone offered you a pile of free money, you'd probably take it, right? But millions of Americans are essentially saying "no" to extra cash by not taking full advantage of employer matching contributions to their retirement accounts, says a study by Financial Engines, an independent investment advisor.

One quarter of employees are not saving enough to get their match, according to the report. On average, those employees missed out on an extra $1,336 a year, or a little less than an extra $25 a week. Overall, Americans are losing roughly $24 billion every year in matching contributions, Financial Engines estimates. The company reached its estimates after looking at the savings history of 4.4 million retirement plan participants at 553 companies.

The lower a person's salary, the more likely they were to miss out on an employer match, the study found. Among people earning less than $40,000 a year, 42% weren't saving enough to get a match. Only 10% of workers with salaries above $100,000 weren't getting their match. That makes sense, as lower-paid workers need to use a greater portion of their income to meet immediate needs and have less left over for long-term goals like retirement.

A larger number of young workers also were also missing out on matching contributions. Thirty-five percent of 25-year-olds and roughly 30% of 30-year-olds were turning down free retirement money, compared to just 16% of 65-year-olds.

The study didn't look at why millennials were more likely to turn down matching contributions, though lower salaries, high student loan debt, and other financial obligations are all likely culprits. When Wells Fargo asked millennials why they weren't saving for retirement, 84% said they didn't have enough money to do so and 77% said they were focused on paying down debt.

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With retirement a distant goal compared to more immediate concerns, many young people may simply be pushing planning for their golden years to the back burner, reasoning that they can save for the future later. That's too bad, because younger workers have the most to gain from the compounding power of matching contributions. Financial Engines estimates that for a 25-year-old worker, losing out on $1,336 in matching contributions every year for 40 years would mean $142,270 less for retirement.

"I think it's pretty standard that someone just starting their career has so many other things on their plate that they give retirement planning short service," Travis Sollinger, director of financial planning at Fort Pitt Capital Group in Pittsburgh, told Think Advisor. "It's one of the last items on their list of the things they want to spend money on. Which is a real shame. The young are the ones that can take full advantage that they have a long time until retirement."

Employers should be doing more to help their employees save for retirement, says Financial Engines. One way to increase the percentage of people who get their full match is to automatically enroll all employees in a retirement plan, with initial contributions at least up to the match amounts, suggests the company.

Yet automatic enrollment can come with a catch, other studies have found. Researchers at the Center for Retirement Research at Boston College looked at employers that automatically enrolled employees in a 401(k) or similar retirement plans and found that they tended to offer slightly lower matching contributions, perhaps because the company was attempting to control costs.

While more employer support for retirement planning is probably necessary to really increase savings rates in America, employees shouldn't sit back and expect their company to take the lead on preparing them for a secure financial future. Those people who are fortunate enough to work for a company that offers a retirement plan with matching contributions should take the initiative and make sure they're saving enough to get their full benefit. Otherwise, they're just leaving money on the table.