An employer 401(k) match is one of the most valuable benefits most people have. It is extra pay that goes straight into your retirement account, and the only thing you need to do to get it is contribute enough yourself.
Yet a Financial Engines study of 4.4 million retirement plan participants found that about 1 in 4 employees don't save enough to get their full match. The typical shortfall was $1,336 a year, adding up to roughly $24 billion in unclaimed matching money across the US every year.
How a 401(k) match works
Most matches follow a simple rule written in your plan documents. A common one is:
Your employer adds 50 cents for every dollar you contribute, up to 6% of your pay.
In that example, if you earn $60,000 and contribute 6% ($3,600), your employer adds $1,800. If you contribute only 3% ($1,800), your employer adds just $900, and the other $900 is gone for the year.
Other common formulas include a dollar-for-dollar match up to 3% or 4% of pay, or a tiered match such as 100% of the first 3% plus 50% of the next 2%.
Three reasons people miss out
- They never changed the default. Many plans auto-enroll new hires at 3%, which can sit below the level needed for the full match.
- They don't know the formula. The match rule is often buried in a long plan summary.
- They front-load contributions. Some plans match each paycheck separately. If you hit the annual contribution limit early in the year, you can miss the match on later paychecks unless your plan offers a "true-up".
How to make sure you get all of yours
- Find your match formula in your plan's summary plan description or your benefits portal.
- Work out the contribution rate that captures the full match, and check that your current rate is at least that high.
- Ask your benefits team whether the plan has a true-up if you expect to reach the annual limit early.
- Check your vesting schedule so you know when the matched money is fully yours.
Let PerkEasy do the maths
PerkEasy reads the match rule you enter, compares it with your contribution rate and shows how much match you could be missing, with the calculation laid out step by step. You can try it with sample data in the demo or create a free account to check your own plan.
PerkEasy estimates are based on the details you enter and are not financial advice. Always confirm with your plan documents or benefits team.