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For years, the sage advice has been to take advantage of your employer’s 401(k) retirement savings program, especially if the company matches your contribution.

Not doing so means you’re leaving money on the table.

So how much are you giving up? Plenty.

In fact, workers are probably leaving $24 billion a year in unclaimed 401(k) company matches, according to a study by Financial Engines. And no, that’s not a typo.

The company, which provides retirement advice to employees in 401(k) plans, examined the saving records of 4.4 million retirement plan participants at 553 companies. It found that 25 percent of employees miss out on receiving the full company match by not saving enough.

“The typical employee failing to receive the full match leaves $1,336 of potential ‘free money’ on the table each year, which equates to an extra 2.4 percent of annual income not received,” Financial Engines said.

Using a return of 4.5 percent a year and factoring in compounding, the company figures that free money could amount to as much as $42,855 over 20 years.

“Many people might simply be unaware of the benefit, which demonstrates why it’s important to communicate it and how much money could be at stake,” said Greg Stein, director of financial technology at Financial Engines. “Many people just feel that they can’t save more. We hope this information will encourage people to save more.”

Not surprisingly, the employees most likely to miss out on the company match are lower-income and younger employees.

“For example, 42 percent of plan participants earning less than $40,000 per year do not take full advantage of the employer match, compared to just 10 percent of employees earning more than $100,000 annually,” Financial Engines said. “Likewise, employees under age 30 are approximately twice as likely to miss out on the employer match compared to employees over the age of 60.”

I understand that saving is difficult for a lot of people, especially people with lower incomes and those just starting out. But the one thing young workers have on their side is time. If they start saving when they’re young, they benefit from the investment growth on those dollars over time.

As employees age, the likelihood of missing out on the full employer match declines steadily.

“The exception to this trend occurs during middle-age years between age 35 and 45, when the rate of decline flattens out,” Financial Engines said. “The 30s and 40s are often a time when employees are responsible for the cost of raising and educating dependent children, which can reduce the amount of income available for retirement savings.

“However, after the age of 50, more employees focus again on saving for retirement and taking full advantage of the match contributions from their employer.”

What’s more, they’re usually making more money and can afford to save more.

Companies should do all they can to help employees save enough to get the match.

“The best practice we’ve seen in the industry is when we see employers default employees into a savings rate that automatically maximizes the match for their people,” Stein said.

Failing that, companies should automatically raise employees’ savings so they eventually reach the threshold to qualify for the match, he said.

Pamela Yip is a personal finance columnist for the Dallas Morning News.

pyip@dallasnews.com

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