Retirement expert: 1-in-4 workers miss opportunity to 'capture literally free money'

Nick Robertson
Senior Producer

Open enrollment season is underway for many American workers. And there’s one simple financial mistake all too many are making.  

“You need to increase your [401(k)] contribution and capture literally free money,” Ric Edelman, chairman of Edelman Financial Solutions, told Yahoo Finance’s YFi PM. “Open enrollment gives you a wonderful opportunity to rebalance your account.”

Open enrollment for employees choosing workplace benefits generally begins between Oct. 1 and Nov. 1. About 55 million American workers are active 401(k) participants, according to the latest figures by the Investment Company Institute (ICI). The organization estimates that 401(k) plans now hold a whopping $5.8 trillion in assets.

“$1,300 is the average amount of money the average worker in the country misses out on employer-match,” Edelman said. “1-in 4-workers don’t get the employer match. They don’t save enough in the plan to qualify for the match. It’s $24 billion a year.”

Edelman appeared on Yahoo Finance as part of an ongoing partnership with the Funding our Future campaign, a group of organizations advocating for increased retirement security for Americans.

An employee holds U.S. dollar banknotes at a money changer's office on August 27, 2015. (Photo: ADEK BERRY/AFP via Getty Images)

401(k) impact from “Medicare for all”

The 2020 presidential race is also casting 401(k) plans into the spotlight. 

Democratic senator Elizabeth Warren’s “Medicare for All” health care proposal — which acknowledges a cost of around $50 trillion over a decade — relies on a 0.1% tax on financial transactions like stock trades to help foot the bill.  

While the percentage may seem small, Edelman warns it’s anything but that. 

“It’s a huge amount of money when you consider the cost of trading,” Edelman argues. “[Senator Warren’s proposal] is a very big percentage of that and so it dramatically reduces returns over time.  There’s no question about it.”

DES MOINES, IA - NOVEMBER 01: Democratic presidential candidate Sen. Elizabeth Warren (D-MA) speaks during The Iowa Democratic Party Liberty & Justice Celebration on November 1, 2019 in Des Moines, Iowa. (Photo by Joshua Lott/Getty Images)

As a result, Edelman believes it’s the middle class who could ultimately feel the pinch should Senator Warren’s plan come to pass.

“These folks are all desperately trying to save for their future… through their 401(k) at work, or 403(b) plans, [or] have IRA accounts,” Edelman says. “These accounts — or pension accounts — are predominantly owned by the middle class.”

He stressed: “We have to look not only at the current impact, but the long term impact.”

Nick Robertson is a senior producer at Yahoo Finance.

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