Imagine a young married couple. One partner invests heavily in his employer’s 401(k), saving for both spouses. The other focuses on paying the bills and contributes nothing to her retirement plan, missing out on the employer's matching funds.

That was how Niv Persaud and her husband handled their finances.

“My income was going toward our expenses, and he was going to focus on retirement,” she said. “And I had a great company match, and I didn’t pay attention to that.”

The marriage eventually ended. Three decades later, Persaud works as a certified financial planner in Atlanta. Her lost retirement savings provide a cautionary tale.

How much potential savings did she lose?

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“I don’t even want to think about it,” she said.

Married couples don't maximize 401(k) matching options

In fact, 1 in 4 married couples fails to take full advantage of employers who make matching contributions to 401(k) retirement plans, a recent study found. The oversight costs them nearly $700 a year, on average.

Nearly two-thirds of American workers have access to an employer-sponsored defined contribution retirement savings plan, according to the paper, titled “Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples,” and released in April by the National Bureau of Economic Research.

Most plans offer a match: The employer contributes to a 401(k), matching some or all of the funds paid into the plan by the worker. In one typical model, the employer matches half of every dollar a worker contributes, up to a maximum of 6% of the worker’s pay.

The study found that about 24% of married couples left money on the table by failing to claim some of an employer’s matching funds. Those couples lost $682 a year, on average, money they could recover simply by changing the allocation of their retirement contributions. The findings are based on IRS tax data and retirement plan descriptions.

“There’s a lot of advice around, ‘You should save more,’” said Taha Choukhmane, an assistant professor of finance at the Massachusetts Institute of Technology Sloan School of Management. “It’s not just how much you save. It’s how you save, and where you save.”

Choukhmane co-authored the working paper with Cormac O’Dea, an assistant professor of economics at Yale, and Lucas Goodman, an economist at the Treasury Department.

The researchers stressed that their focus was not on couples that don’t save for retirement, or don’t save enough. Instead, they looked at couples that could increase their savings merely by shifting contributions from one spouse to the other.

“You don’t need to save more. You don’t need to change how you spend,” Choukhmane said. “It’s all about how you allocate money across accounts.”

In some couples, the researchers found, only one spouse contributed to a retirement plan, while the other ignored a plan with a generous employer match. Other couples split retirement savings equally when they should have put more money into an account with a larger match.

“The 401(k) is really designed around individuals,” Choukhmane said. “And I think a lot of people need to realize that this is not about the individual.”

Couples fail to communicate, coordinate on retirement savings

The new study underscores a lack of cooperation between spouses on an important matter of household finance. The researchers said it also speaks to the broader issue of financial communication in marriage.

“It does open up a question of what other big decisions couples are not coordinating on,” O’Dea, the assistant professor at Yale, said.

The researchers found that couples that had been married longer, and couples with children, tended to do a better job at communicating and coordinating retirement savings. Couples in shorter relationships did worse.

Couples headed for divorce were also less likely to coordinate their retirement contributions. The researchers discovered this by studying the saving patterns of marriages that ended in divorce.

Investment advisers often recommend that American workers save 10% to 15% of their pretax income for retirement. They also urge them to max out any matching funds from the employer, which boosts the worker’s effective savings rate.

If a company matches up to 6% of your salary in 401(k) contributions, "maxing out" means contributing at least that much of your annual pay.

“The first priority for any investor should be to save enough to get at least the entire employer match,” said Rob Williams, managing director of financial planning at Charles Schwab.

Yet, many partners leave the money untapped. Vanguard, for example, reports that 31% of its retirement plan participants failed to claim some or all of an employer’s matching funds in 2022.

Retirement savings rates are lower for younger workers, whose retirement falls in the more distant future. Among Vanguard participants, the retirement savings rate in 2022 ranged from 5.2% for workers under 25 to 9% for those over 65.

Americans have struggled with retirement savings amid high inflation

Many Americans of all ages have struggled to save in the last two years when inflation reached a 40-year high.

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In the 2023 Retirement Confidence Survey, conducted by the nonprofit Employee Benefit Research Institute, 84% of workers voiced concern that the rising cost of living will make it harder for them to save money for retirement.

An employer match may not seem like much money.

“People look at it and say, ‘It’s only 3%,’” said James Gambaccini, a certified financial planner in Reston, Virginia. But “it’s a 100% match up to 3% of your salary.”

The formula Gambaccini describes, matching the employee’s full retirement contribution up to 3% of their pay, would double a 3% contribution to 6% without the worker spending another dollar. An employee with a $50,000 salary would see a $1,500 contribution grow to $3,000.