Saving for the future is never easy, but as retirement costs continue to climb, it's especially challenging to build a robust nest egg.
Fortunately, there's a way to boost your savings that requires next to no effort on your part -- and roughly one-third of workers aren't taking full advantage of it. By making one simple move, it's possible to boost your savings by roughly a quarter-million dollars. Here's how.
An effortless way to increase your savings
The 401(k) can be a powerful tool for building your retirement fund, but if you have access to employer-matching contributions through your plan, they can help supercharge your savings.
Image source: Getty Images.
With matching contributions, your employer will invest a set amount of money in your account up to a certain limit. While each plan will be different with varying requirements, all you generally need to do to earn that money is contribute to your 401(k).
As of 2021, around 31% of people who were eligible for matching 401(k) contributions did not earn the full match, according to Vanguard's How America Saves report. In other words, millions of Americans could be leaving a lot of money on the table.
How much you can earn with an employer match
Again, all 401(k)s are slightly different, so it's best to check with your specific plan to see how much you may be eligible to earn.
That said, the average maximum 401(k) match is around 3.5% of a worker's wages, according to data from the U.S. Bureau of Labor Statistics. The median income in the U.S., as of 2022, is around $55,000 per year.
Based on these two figures, then, the average 401(k) match would be around $1,925 per year. While that may not sound like much, it adds up over time.
If we assume you're earning a modest 8% average annual return on your investments, here's approximately how much $1,925 per year would grow over time:
| Number of Years | Total Savings |
|---|---|
| 10 | $28,000 |
| 20 | $88,000 |
| 30 | $218,000 |
| 40 | $497,000 |
Data source: Author's calculations via Investor.gov.
Keep in mind, too, that these calculations are only accounting for the employer match itself. Once you add in your own contributions, your total savings would be at least double these figures.
Most people also see their income increase over time as they advance in their careers. Because the 401(k) match is normally a percentage of your wages, as your salary increases, so will the amount you can receive in matching contributions.
Give your retirement a boost
Employer-matching contributions are a fantastic way to grow your savings while barely lifting a finger, so if you're fortunate enough to have access to this perk, it's wise to take full advantage of it.
Even if you can't invest enough right now to earn the full match, contributing as much as you can afford is still beneficial. Matching contributions are essentially free money, and the closer you can get to earning the full match, the easier it will be to build a healthier retirement fund.
