If you are fortunate enough to have a workplace retirement plan that offers a matching contribution, the goal should always be to set your contribution rate so you qualify for the maximum employer match.
But for married couples who both have a workplace plan, that goal is a bit trickier. There is no standard formula for how a match works. One spouse may get a dollar-for-dollar match on the first 3% saved, while the other spouse could get a 50-cent match for every dollar contributed up to the first 6% of salary.
When there are different formulas, it makes the most sense for a couple to coordinate their retirement savings. The spouse with the more generous match (in the above example, the dollar-for-dollar match on the first 3%) should make sure they contribute enough to earn the full match before the couple focuses on earning the full match available in the other spouse’s plan.
Yet according to the Center for Retirement Research at Boston College, nearly 1 in 5 married couples don’t follow this strategy and miss out on an average of $757 a year in matching contributions. For a married couple, that works out to a loss of more than $14,000 by the time they reach age 65.
That foregone money isn’t because they saved less, it’s because they didn’t save smart. They could have boosted their retirement savings without contributing an extra dollar of their own money.
If you and your spouse both have workplace retirement plans, don’t think of them as separate accounts. Think of them as part of one household retirement strategy. At least once a year, compare your plans’ matching formulas and make sure every retirement dollar is being directed where it will generate the largest employer contribution.
I also want to stress that capturing the full employer match is the starting point, not the finish line. If your budget is tight and you can’t save as much as you’d like right now, coordinating your contributions to maximize matching dollars is one of the smartest moves you can make. But your long-term goal should be to save around 15% of pay for retirement each year, including any employer match. Once you’ve secured every available matching dollar, focus on gradually increasing your contribution rate until you reach that target.
Maximizing the match is the first step toward retirement security, not the only step.
And don’t assume the strategy you set up years ago is still the right one today. Employers can change their matching formulas, and job changes can completely alter the equation. Make it a habit to review both plans at least once a year. A quick annual checkup could help ensure you’re not leaving free money on the table.
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