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October 26, 2011 09:50 PM

Double Your Investment


Are you turning down free money? Millions of workers are passing up on money from their employer.

A new report found that 30 percent of people who take part in their 401(k) plan are not putting in enough to get their full employer match.


But taking this money now is a big deal later.

If your employer came and offered you a $1,000 bonus every year, you'd take it right? But if you're not putting enough money in your 401(k) to get your employer's match you're essentially turning down free money.

"It does seem silly. But when you're talking about the economy and people living paycheck to paycheck; sometimes that three percent, even though there's an extra three percent coming from the employer-it makes more sense to stay in their wallet right now," Waddell & Reed Financial Advisor Tom Carson said.

But in the long run, your three percent contribution matched dollar per dollar by your employer can really add up.

"Could be several hundred thousands; when you take the time-value money compounding; dollar cost averaging; all the principals of investing; it can be large sums of money," Carson said.

Those least likely to take advantage of employer matches are workers in their 20's. But they have the most time to watch that money grow.

"If you start while you're younger you get the compounding effect and you don't have to contribute as much as somebody starting later in life," Carson said.

Auto enrollment plans can make a big difference. Companies with them see about 90 percent employee participation in the 401(k) plan. Those without auto enrollment only see about half their employees take part in their retirement savings plan.

Carson also thinks employers need to have more benefit meetings to educate employees on the 401(k) match.

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