The Silly Way You Could Be Missing Out on More Retirement Savings

Key Points

• It's important to save well for retirement so you're not overly reliant on Social Security.

• Many people worry they won't have enough money for retirement.

• A simple move on your part could help your nest egg grow larger.

• The $23,760 Social Security bonus most retirees completely overlook ›

If Social Security could replace 100% of workers' paychecks, then there wouldn't be a need to save for retirement independently. But alas, that's not the case.

If you earn an average paycheck, you can expect Social Security to take the place of about 40% of what you used to earn. And that assumes that benefits don't get cut in under a decade, which is something that may happen.

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That's why it's so important to save for retirement on your own. But many workers today are worried they won't manage to accumulate enough savings to maintain the lifestyles they want.

In a recent Employee Benefit Research Institute survey, only 67% of workers said they're confident they'll have enough money to live comfortably throughout retirement. This means that roughly one-third of workers don't feel confident they're saving enough.

If that's a fear of yours, there may be an easy way to squeeze more money into your nest egg. And it's a move you should definitely take advantage of.

Are you getting your full 401(k) match?

There are some workers who do not have access to a 401(k) plan through work. If you're in that boat, the good news is that you can fall back on an IRA, since these accounts are not tied to employers. If you do have a 401(k), though, then you may have an opportunity to grow your nest egg more easily by claiming your workplace match in full.

It's a pretty common practice for employers who sponsor 401(k)s to match worker contributions to some degree. And if you're able to contribute enough to your 401(k) out of your paychecks to claim that match in full, it could work wonders for your savings over time.

Let's imagine whatever company you work for is willing to give you up to $3,000 for your 401(k) each year. Over 20 years, that's an additional $60,000.

But that's not all. The $3,000 you're getting per year from an employer is also money that you can invest. So in this example, those matching dollars may be worth a lot more than $60,000 to you over time, depending on how your portfolio performs.

An opportunity you don't want to waste

Employer matches in 401(k)s are basically free money for your retirement. So if you aren't currently snagging your workplace match in full, you may want to make some modest changes to your spending so you're able to contribute enough to get all the free money your employer is willing to throw your way.

And if you're not sure what match you're entitled to, read your plan documents or benefits details. Or, talk to someone in human resources.

Now that said, do keep in mind that some company 401(k) matches have a vesting schedule attached to them. This means you may not be entitled to your complete workplace match right away. Rather, you'll vest in it over time.

Imposing a vesting schedule is a means of retaining employees, and it's something that's fairly common in the workplace today given that frequent job-hopping has become more widely accepted. But even then, it pays to try to capitalize on your employer match while understanding how your company's vesting schedule works.

If you're worried your retirement savings will fall short, you're in good company. Aim to snag your complete workplace match so you're not leaving a single dollar for your 401(k) on the table.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

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