Prior to 2011, the average employer match was usually in the 3% to low 4% range, but has been slowly increasing each quarter in the years since.
The Stanford Center on Longevity found in a 2018 report that if you want to retire by age 65, you should aim to set aside 10-17% of your total income, starting at age 25. An employer match makes that easier to manage. In fact, per Fidelity, the 4.7% average match "boosted the average total savings rate to an all-time high of 13.5%" this year.
That said, almost 25% of U.S. adults have no retirement savings at all. The average account balance of those with 401(k) savings, according to Fidelity, was $103,700, though that varies greatly by age.
While exactly how much Americans should save for retirement varies depending on who you ask and your individual circumstances, many experts agree that 15% annually is a good amount to aim for.
An employer match is often referred to as "free money," but a better way to think about it is as part of your total compensation package. You want to contribute up to the match so that you're getting all of the money your employer owes you — and padding your retirement savings.
"A buy-one-get-one-free deal is how I think of it," Monica Sipes, a certified financial planner and senior wealth advisor at Exencial Wealth Advisors, tells CNBC Make It. "The match is something that's considered in your overall compensation, so by not taking advantage of it you're not getting a full freight of what your employer was expecting to pay you."
Here's an example of the difference it can make. Let's say you're offered a job with a $90,000 salary and 5% 401(k) employer match, and a job with a $94,000 salary and no match. The $90,000 base is actually the better deal, because if you contribute up to the match, your employer will throw in $4,500, bringing your total compensation to $94,500 for the year. Over time, that will be worth even more as your investment earnings compound.
"Even if they're offering 30 cents on the dollar, that's an automatic 30% return that you're getting," says Sipes. That's hard to beat.
If you contribute up to the match and you're still financially comfortable, Sipes recommends auto-escalations at least once a year.
"If you get a 3% raise, maybe you take half of that and try to increase your 401(k) contribution," she says. "Just have a pay-yourself-first mentality." The closer you get to maxing out your 401(k) contributions — which is $19,000 this year — the better, and any little bit from your employer helps.
Janet Alvarez, personal finance expert at Wise Bread, takes it one step further, telling CNBC Make It that savers should divert the entirety of their raises into their retirement savings.
"If you can live on your current income, there's no reason why any salary increase can't go straight into your retirement account," says Alvarez.
And even if your employer doesn't offer a match — 35% of private sector workers do not have access to a 401(k) plan — it's important to contribute to a retirement account, whether that's a 401(k) or an individual retirement account, says Alvarez.
"If your employer doesn't match, consider contributing tax refunds or any bonuses or commissions into a self-directed IRA," she says. "The average tax refund is about $2,500, which in some cases amounts to more money than an employer match to a 401(k)."
Here are some other savings tips:
- Strategies to save for retirement without going broke
- Here's how much you should have saved at every age
- How to save for retirement if you don't have a 401(k)
- How to use a health savings account for retirement savings
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