Unfortunately, most don't know enough to take advantage of it.

While Americans routinely lament they haven’t saved enough money for retirement, researchers with the U.S. Census Bureau say four out of five of us work for a company that offers a 401(k) or some other retirement plan.

So what’s the problem? Well, some don’t use it and many don’t use it well, according to the latest study on income disparity from MassMutual.

Most employers offer more than a place to park your money: They offer to match anywhere from 2 percent to 7 percent of it. And the people most likely to pass up free money are the people who aren’t making a lot to start with.

When MassMutual considered all workers making between $35,000 and $150,000, nine in 10 invested in their 401(k).

But drill down to those making $35,000 to $40,000, the study’s “low-income earners,” and you learn they were twice as likely to skip an employer’s retirement plan as those who made more.

When they did chip into a 401(k)…

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  • Only 67 percent said they invest enough to collect a match
  • Ten percent said they don’t
  • A whopping 23 percent have no clue if they put in enough to qualify for the match or not

That level of I-don’t-know is greater than reported by any other income group.

Not surprisingly, those at the bottom of this salary range contributed less. The majority put away at least 5 percent and up to 9 percent. Those who earned $45,000 or more were three times as likely to stash 15 percent or more in a retirement account.

Why don’t we save more?

Most (70 percent) said they just couldn’t afford to save.

About 23 percent said their employer didn’t offer a match, or it just wasn’t enough to compel them to invest. Another 14 percent said they want to manage their savings outside of the company plan, and 14 percent also said they wanted to put their money where it’s easier to tap in an emergency.

“Employers and financial advisers need to help educate workers — especially those who may see savings as unaffordable — to find dollars and then make the most of them,” says Tom Foster, national spokesman for MassMutual’s Workplace Solutions.

That education would do well targeting millennials who, while not careless with their money, belong to a generation that reports the most money-related stress, according to research from Schwab Retirement Plan Services.

Though a quarter say they struggle with student loan debt, 80 percent say they are caught up on their bills and have some money left over.

At any age, deciding whether to put that leftover cash into paying down a loan or credit card debt, or into building a retirement fund, can be complicated. You need to compare the cost of mounting interest on debt to your expected returns on investment, and factor in the 401(k) match if you have one.

“It’s heartening to see that saving for retirement has become a priority for so many workers, especially the youngest generation of workers, for whom retirement can seem like a lifetime away,” says Steve Anderson, president of Schwab Retirement Plan Services. “In spite of — or perhaps because of — the financial challenges they faced as they entered the workforce, millennials know how critical it is to keep on top of their finances today with an eye toward tomorrow.”

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Michelle Bryan

Michelle Bryan

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Bryan is the social media director for Debt.com.

Career and Business, News

401k, office life, save money

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Article last modified on December 8, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Most Americans have a 401(k) Retirement Plan at Work - AMP.