Too many Americans are passing up on free money – a 401(k) plan

The 401(k) is considered the pinnacle of U.S. retirement plans, but the majority of Americans aren't saving into one.

New research is giving a more detailed view of how Americans are saving for their retirement – and many of them apparently aren't.

The 401(k) is considered the pinnacle of U.S. retirement plans. It's an account that allows you to contribute money tax-free (until you take it out), and it's often matched by your employer and invested on your behalf.

But Census Bureau researchers found that 68 percent of American workers are not saving into a 401(k) or a similar tax-deferred retirement plan (such as a regular IRA), Bloomberg reports.

The finding is surprising given that 79 percent of workers are employed by a company that offers a 401(k), but just 41 percent of these workers take their employer up on the offer of what is essentially free money.

The research is based on 2012 tax records from 155 million individuals and 6.2 million companies, which were studied to see who is contributing and how much.

The reasons that people aren't saving go beyond not having enough cash, with WKOP reporting many workers either are not eligible to join the company plan, don't know about it, or just don't bother to sign up.

The working world is also different than it was 10 years ago, the Denver Post reports, with younger workers in particular more likely than previous generations to switch jobs or work with smaller firms that don't offer retirement plans.

Meanwhile the skyrocketing price of college has left young graduates burdened with debt, leaving little room in their budgets to start retirement saving.

How much should I be saving?

GoMN's "Tip Jar" column took a quick look last month at what young workers should be doing with their money, and at the top of the list was saving for retirement.

Fidelity Investments estimates that you need to have the equivalent of your annual salary saved in your various retirement accounts by the time you're 35 years old, to be on track for a comfortable retirement.

By the time you're approaching retirement, it needs to have ballooned to eight times your annual salary.

Many companies will match your 401(k) contributions, often between or up to 3-6 percent, so even if you can afford only to save a small amount, it's still worth doing as soon as possible.

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