Impoverished mathematician Grigori Perelman lives in St. Petersburg, Russia, with his aging mother. Solving a notoriously tricky math problem won him a $1 million prize, more than enough to banish his money troubles. But amazingly, Perelman refused the cash, arguing that he wasn't solely responsible for the solution, and therefore didn't deserve to be a millionaire. His behavior may seem shocking, but it's not as uncommon as you'd think. Too many of us turn down free money every day.
When we don't contribute enough to make the most of our 401(k) accounts and receive maximum matching funds from our employer, we're thumbing our nose at free greenbacks. Moreover, we usually don't have even as good a reason as Perelman did. We just don't think about it, or get around to it, or do the math to see how much we're hurting our future.
A typical 401(k) plan matches of 50% of employee contributions up to 6% of salary. With a $70,000 salary, that would be $2,100. I've rounded up several companies with above-average 401(k) plans. Check out what many of their employees are leaving on the table -- each year:
|
Company |
Company Matching for 401(k) Plans |
Contributing 10% of a $70,000 Salary Could Receive This Match |
|---|---|---|
|
Alcon (NYSE: ACL) |
100% of contributions up to 5% of pay, plus a 7%-of-pay contribution from the company |
$8,400 |
|
IBM (NYSE: IBM) |
100% of contributions up to 6% of pay, plus a contribution from the company of as much as 4% of pay |
As much as $7,000 |
|
Southwest Airlines (NYSE: LUV) |
100% of contributions up to 7.3% of pay |
$5,110 |
|
McDonald's (NYSE: MCD) |
300% of contributions up to 1% of pay, plus 100% of the next 4%, plus a discretionary contribution from the company of up to 4% more |
As much as $7,700 |
Keep in mind that many employers, especially the ones above, offer profit-sharing and other financial benefits besides the 401(k). Furthermore, not every aspect of otherwise excellent plans is worth applauding. Nike (NYSE: NKE) automatically parks its matching contributions in company stock, which can leave employees with too many eggs in one basket.
Still, while we strive to build comfortable retirements, too many of us say "no thanks" to thousands of dollars in free money each year. Surely, we don't need to be math geniuses to see that there's something wrong with that picture.
