Recent Study Reveals That 96% of Vanguard 401(k) Plans Offer This Important Element. Are You Maxing Out Your Benefits?

Are you saving enough for retirement? Most people are saving what they can. But, most people also don’t feel like they’re doing enough. As the Motley Fool’s own in-house research arm points out, only about one-third of U.S. households feel like they’re on track for retirement. The other two-thirds believe they’re behind by at least a little.

The key to catching up, of course, is easier said than done. That’s saving more. After three years of above-average inflation, the money needed to tuck more away for retirement simply isn’t in most people’s budgets.

But there is one move many Americans could make that would matter. That’s participating in your company’s 401(k) plan, or for those investors who already do so, ramping up your contributions. You may well be leaving free money on the table if you don’t.

Most employees can get free money… seriously

In its recently published “How America Saves” report for 2025, mutual fund company and retirement plan administrator Vanguard provides financial snapshots for several different groups of people in its workplace retirement plans. That’s not necessarily representative of all 401(k)s everywhere, but it’s a broad cross-section. As of the end of 2024 the median balance of all the retirement accounts it oversees was $38,176, while the overall average retirement account balance was $148,153. As would be expected, however, both of those numbers are bigger for older workers, and smaller for younger ones.

There’s a curious statistic buried deeper in the report though. That’s the number of total plans it administers seeing regular contributions from the employer along with employees’ salary deferrals. All told, 96% of Vanguard’s workplace plans offer these investors some sort of employer-matching contribution to their accounts. It’s simply there for the taking.

Here’s what you need to know about workplace retirement plan matching, if you’re not familiar with this perk.

The particulars of employer matching

Count yourself lucky if you’re employed by a company that offers such a retirement benefit. Not everyone is. The Bureau of Labor Statistics reports that as of 2023 only 73% of civilian workers in the United States had access to any workplace retirement plan. Slightly fewer enjoy the benefit of employer contributions.

But what exactly is it? Just as the name suggests, matching contributions are an employer’s match of its employees’ contributions to their own retirement accounts like a 401(k). The more the worker puts in, the more the employer chips in as well.

There are limits. Vanguard notes that the majority of its retirement plans will only contribute $0.50 for every dollar the employee in question contributes, and then only up to 6% of the worker’s salary. Another one-fourth of the plans it administers will offer a dollar-for-dollar match up to a relatively low percentage of their employees’ pay — say 2% to 3% — while half of that worker’s contributions may be matched up to another 2% to 3% of that person’s wages. (Obviously most companies can’t come up with an infinite amount of cash contributions to their workers’ retirement funds.)

Still, this benefit can be significant. Rival fund company and retirement plan administrator Fidelity reports the average participant in its workplace plans directed $8,800 of their own earnings into their 401(k) accounts last year, while employers chipped in additional $4,770 for each of their employees. Not bad. That’s 54% of workers’ own saving efforts.

The only catch? Your company’s contribution to your 401(k) account may or may not be immediately “vested.” That just means while it’s earmarked for your benefit, you only get to keep it if you remain employed with the organization for a minimum number of years… often anywhere from three to six, although nearly half of the retirement plans Vanguard oversees are immediately vested. The good news is you typically become increasingly vested in these employer contributions as you move toward the full vesting mark. Your human resources department should be able to provide you with the specifics of your company’s retirement plan’s vesting schedule.

Rest assured that you always own 100% of your contribution of your own money. You’ll keep all of that even if you don’t become fully vested in your employer’s contribution to your retirement account.

Take your highest-odds shot of achieving your goal

But you don’t like your retirement plan’s mutual fund options? Maybe you’re more of a self-directed investor that would rather own individual stocks? If so, fair enough. You’re not alone.

Just keep the bigger-picture math in mind. Assuming you’re fully vested or eventually will be, 100% of your employer’s contribution to your retirement account is free money. And, assuming your match is in the 50% ballpark that applies to most people, you’re achieving an immediate 50% return on your investment just by participating in your company’s plan. You’d be hard-pressed to do better than that with any other investment option.

And for what it’s worth, you may be better off with your plan’s boring buy-and-hold index fund options anyway, rather than trying to beat the market by picking individual stocks.

Data regularly updated by Standard & Poor’s puts things in perspective, indicating that more than 80% of large-cap funds offered to U.S. investors have underperformed the benchmark S&P 500 and all of its index funds for the past five-, 10-, and 15-year time frames. Worse, the few funds that managed to beat the broad market for any one of those time frames rarely beat it in another. Things don’t get any better when you move down to the mid-cap or small-cap segments of the market either, or for that matter, when you’re limiting your look to value or growth stocks.

It’s a testament to just how difficult is to beat the market even when you’ve got access to all the right tools and information. Simply aiming to match the market’s performance with index funds may well be your best bet, particularly when your employer is willing to give you free money to invest on your own behalf.