One of the best deals is workplace pensions.
Contributions to a 401 (k) plan are pre-tax, so the more you contribute, the lower your taxable income (and, therefore, how much you pay in taxes). Plus, companies often offer an employer match, which is basically free money for your retirement savings goals.
Yet 17% of workers with access to an employer-sponsored plan does not currently contribute. And of those who do, 12%, or 17.5 million people, are leaving the company’s matching funds on the table, according to a recent MagnifyMoney survey.
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Most people said it was because they couldn’t afford to contribute more to their plan, MagnifyMoney found. The personal finance site surveyed more than 1,200 workers in August.
“If you don’t pay enough money to get your employer, you are literally leaving free money on the table – money that belongs to you and is part of your pay,” said Ismat Mangla, senior manager of content of MagnifyMoney.
Overall, retirement account balances, which fell sharply in 2020 when the Covid epidemic sent economic shockwaves, have now reached new highs, according to data from Fidelity Investments, the largest provider. of the country’s 401 (k) savings plans.
To boost your retirement savings, Jessica Macdonald, vice president of Fidelity, recommends opting for an automatic indexing feature, if your employer offers it. This feature will automatically increase your savings rate by 1% or 2% each year.
And always contribute enough to get full employer equivalency, she said. “That way you won’t leave any money on the table.”