Say yes to free money

Not many of us would turn down free money. Yet nearly four in ten workers in the United States are doing just that by not contributing enough to their employer's retirement savings plan

These people are missing out on the full company match available to them. The company match is money an employer contributes if the employee saves in the plan. 

Match math

If your employer offers a match, be sure you're saving enough to get every penny of it. 

To get the most from a match, you need to understand the math. Generally speaking, match contributions come in two types:   

• The employer could use a fixed percentage. For example, an employer might offer a 50% match, up to a 4% contribution rate. So if you saved 4% of pay, you'd receive an additional 2% in matching contributions.        
• The employer could use a tiered formula. For example, an employer might start by providing a 100% match, up to a 3% contribution rate. Then the match would continue but at a lower rate, such as 50% for every dollar for the next 3% saved. In this case, if you saved 6% of pay, you'd receive an additional 4.5% in matching contributions.   

These hypothetical examples are for illustrative purposes only. They do not necessarily reflect the rules of your employer's retirement plan.

What you can do

Contact Vanguard or your benefits office to see if your employer offers a match.

• If one is offered, find out how much you need to save to get the full match.     
• If you're not saving at that rate already, increase your savings rate. Every day you put it off is one more day you're turning down free money.  

Even if you're already saving enough to get the full match, consider increasing your savings rate to a minimum of 12% to 15%, or more if you have some catching up to do.   

Ways to contact Vanguard

You can visit vanguard.com or call Vanguard Participant Services at 800-523-1188. Associates are available to assist you Monday through Friday from 8:30 a.m. to 9 p.m., Eastern time.    

*Source: 2010 Financial Engines National 401(k) Evaluation.