The promise of free money is usually quite attractive.
After all, the stimulus checks that Congress handed out during the early months of the pandemic were hugely popular, with nearly 3 million people signing a petition calling for more.
So why then is 1 in 10 working Americans missing out on thousands of free money that is available now and has been around for a long time?
Although some people don’t know about these programs or think they can’t use them, both problems are easy to solve. Here’s how to make sure you get the money you owe.
Millions don’t make their 401(k) match
A 401(k) match from your employer is the closest to free money.
These general programs ensure that your company matches what you contribute to a 401(k) retirement account, up to a certain limit.
This benefit is part of your compensation package when you get a job, so if you don’t take full advantage of it, it’s like taking no part of your paycheck.
Let’s say you make $60,000 a year, and your employer offers a dollar-for-dollar match up to 6% of your salary. That means the maximum your employer will give you annually is $3,600.
But if you put only $2,000 in your 401(k), your employer will only put in $2,000 — and you’ll leave $1,600 on the table.
Opportunities like this don’t come along very often in life, and yet 17.5 million Americans are guilty of not taking full advantage of the full offer they’re given, according to a recent survey by MagnifyMoney.
Why don’t people contribute more?
A small number of respondents say they don’t understand how 401(k) retirement plans work (6%) or don’t know if their company offers a match (17%).
If you belong to this group, that’s understandable, but when there’s so much money at stake, you’ll want to set up a conversation with your HR representative right away.
Some employees (12%) say they want to wait until they are older to contribute. But as any financial expert will tell you, contributing as soon as possible is critical as it gives your investments more time to grow.
The biggest reason employees don’t take full advantage is affordability; more than a third of respondents say they simply cannot contribute as much as they would like. That makes sense, especially at a time when many families’ budgets are stretched to their limits.
Normally the answer would be to rely on the power of investing even small amounts of money – but with a 401(k) match you may have a different solution.
How to take full advantage
If you have enough money to spare, the first step is to set up automatic payroll withdrawals. A “set-it-and-forget-it” approach ensures that you get the maximum match.
Remember, you can always invest more than the amount your employer will match. And since these automatic withdrawals typically come from your pre-tax income, you don’t have to pay taxes on your contributions.
On the other hand, if you are struggling to find the money to pay your full contributions, a new company launched last year to fix exactly this problem.
The company will advance you the money you need to get the full match, with no credit check or prepayment. Then, after your employer matches your contributions, you withdraw from your 401(k) to repay the company, plus a small portion of the money you received from the match.
It is not so much pure profit as you would receive by putting in your own money, but it is a lot better than missing out on the offer of free money.
Otherwise, you can try some of these proven strategies to find the money you need to get the most money for free:
Score a better mortgage rate. Interest rates are currently historically low; if you refinance, you can save hundreds and thousands each month over the life of your loan.
Consolidate your high interest debt. With interest rates over 20%, credit cards make it easy to get into debt. By combining all your balances into one lower-interest loan, you can save hundreds and get yourself out of debt faster.
Stop paying too much online. It’s hard to be sure you’re getting the best price when there are thousands of stores on the web. Try a free browser extension that automatically applies coupon codes and finds lower prices when you shop online.
Turn pennies into a portfolio. Even if you don’t have a lot of cash to spare, you can still earn returns in today’s hot stock market. A popular app allows you to invest your “change” from daily purchases.
This article provides information only and should not be construed as advice. It comes without any kind of warranty.