Here's How Much the Average 401(k) Match Is Worth

More than 1 in 5 employees are leaving at least some of their 401(k) match on the table, according to Fidelity. That's thousands of dollars lining employers' pocketbooks that could be going to workers in the trenches.

Some of those forgoing their matches are probably doing so out of necessity. Keeping the lights on and food on the table has to come first. But if you've got extra cash, you won't find a better investment than your 401(k) match. Here's what it can do for the average worker.

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What's the average 401(k) match worth?

Every company that offers a 401(k) match sets its own matching formula, but the one that appears to be most common is a dollar-for-dollar match on up to 3% of income and a $0.50-on-the-dollar match on an additional 2% of income. So, the employee saves 5% of their salary for retirement and their employer kicks in another 4%, bringing the total to 9% of the worker's income.

On the surface, it doesn't sound like much. The median weekly U.S. earnings as of Q1 2024 was $1,139, according to the Bureau of Labor Statistics. That adds up to an annual income of $59,228. If we take 4% of that, we'd wind up with $2,369 as an employer match.

That probably won't cover even a month's worth of retirement expenses, but it's just a starting point. You'll invest that 401(k) match, possibly for decades, and by the time you need to withdraw it, it'll be worth a lot more.

A $2,369 match that's invested for 10 years and earns a 10% average annual rate of return would be worth over $6,145. Claiming that one match would actually earn you $13,825 after 10 years because the 5%, or $2,961, you invested to claim your 401(k) match would also grow during this time.

Even that's a drop in the bucket compared to what happens if you claim your 401(k) match every year. The following table shows how your retirement savings would grow if you contributed $2,961 annually and claimed the $2,369 average 401(k) match every year:

Source: Author's calculations.

It's possible you could wind up with less if you're not able to claim your match every year or your investments don't grow as quickly as you'd hoped. But it's also possible that you could wind up with more. If your salary increases over the years, this will boost your 401(k) match. So will saving money beyond what you need to claim your match. Just watch out for the annual contribution limit.

Overcoming barriers to claiming your full 401(k) match

The table above highlights why it's best to claim your 401(k) match whenever you're able to, but there are two things that hold people back from doing this.

Not understanding how your company match works

To solve this, you'll need to figure out what your company's matching formula looks like. It may not be the same as the one we used in our example. Your HR department should have this information, and your 401(k) plan administrator should too.

The most important thing to do is figure out what percentage of your income you need to contribute to get your full match -- 5% in our example above. Multiply this percentage by your annual salary to figure out the total dollar amount you need to set aside.

Then, divide that sum -- $2,961 in our example -- by the number of pay periods left in the year. Say you have 26 pay periods in a year. That means you'd need to defer $114 from your paychecks to claim your full match by year's end. This number could be higher if you wait until later in the year to start setting aside cash.

Lacking funds to claim your 401(k) match

This is a trickier problem, and it might be impossible for some people to solve right now. But some things that could help include:

• Reducing expenses in other areas
• Working overtime
• Starting a side hustle to help you cover your living expenses
• Negotiating a raise
• Seeking out a better-paying position

Do the best you can. Even if you only manage to claim a portion of your match, you can still reap some pretty big benefits.