According to Fidelity, 1 in 5 employees, which represents approximately 20% of employees, are leaving at least part of their 401(k) plan on the table. That’s thousands of dollars left in the hands of employers, that could be allocated to employees, These funds could be of great help and benefit directly to workers.
Some of those who give up their games possibly do so because they need to keep electricity and food on their tables, it should come first, but if you have extra money, there will be no better investment than your 401(k) retirement account, This is what it can do for the average worker.
What is the average 401(k) match?
Companies that offer a 401(k) match have their own matching formula, which appears to be the most common, which is a dollar-for-dollar match of approximately 3% of income and a $0.50 per dollar match. , with an additional 2% on income, so the employee can save 5% of his salary for retirement and his employer makes a contribution of the other 4%, which represents a total of 9% of the employee’s income.
At first glance, it doesn’t seem like a big deal, the average weekly income in the United States, in the first quarter of 2024, was $1,139, according to information provided by the Bureau of Labor Statistics, which adds up to an annual income of $59,228, if we base it on 4% of that, we would end up with $2,369 as the employer’s contribution.
Not Saving Enough Could Left You on a Complicated Situation
That may not cover even one month’s retirement expenses, but it’s just a starting point. You’re going to be investing in that 401(k) contribution, probably for decades, and when you need to make the withdrawal you’re going to worth much more.
A match of $2,369 in which you made a 10-year investment and earns a 10% average annual rate of return would be worth about $6,145, stating that a match would actually earn you $13,825 after 10 years because 5%, or $2,961, which you invested to claim your 401(k) match would also increase during this time.
Even, that’s like a needle in a haystack, if you compare it with what happens if you apply for your 401(k) year after year, the following table will show you how you could increase your retirement savings if you contributed $2,961 to the year and claim the average 401(k) match of $2,369 annually
| NUMBER OF YEARS CLAIMING EQUALITY | TOTAL AMOUNT OF PERSONAL CONTRIBUTIONS TO DATE | TOTAL AMOUNT OF EMPLOYER EQUIVALENT FUNDS RECEIVED TO DATE | 401(K) PLAN BALANCE, Assuming A 10% AVERAGE ANNUAL RATE OF RETURN |
| 1 year | $2,961 | $2,369 | $5,568 |
| 5 years | $14,805 | $11,845 | $33,993 |
| 10 years | $29,610 | $23,690 | $88,740 |
| 20 years | $59,220 | $47,380 | $318,907 |
| 30 years | $88,830 | $71,070 | $915,902 |
| 40 years | $118,440 | $94,760 | $2,464,355 |
You may end up with less if you can’t make your match year-on-year or if your investments don’t grow as fast as you expected. There’s also a chance you’ll end up with more. If your salary increases over the years, this will increase your 401(k) contribution. It’s also good to save money beyond what you need to claim your match, just be careful with the annual contribution limit.
