3 Ways to Get Free Money for Retirement

Take advantage of these employer and federal government perks to boost your nest egg.

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You could be getting free money to put towards your retirement savings. It's true. And I'm not talking about free money from government grants or unclaimed property, like those late-night infomercials promise. This is real money and a lot of it. Here are three easy ways to get free money for your retirement.

A company 401(k) Match. If you have a 401(k) plan through work, chances are your company will match a percentage of your annual plan contributions. Companies do this to encourage employees to utilize the plan. You just have to participate to get the money.

[See 10 Costs That Could Increase in Retirement.]

Think this tip is obvious? Think again. According to a recent study by Financial Engines, 39 percent of the 2 million participants studied were not contributing enough to their 401(k) to receive the full employer match. That's almost 800,000 people in this study alone that pass up this free money.

How much money are they missing out on? Some companies are more generous than others, but the average matching percentage is around 3 percent of pay. For someone making $50,000, that's $1,500 a year that each of these people is leaving on the table. Assuming an 8 percent annual return, $1,500 contributed annually becomes $452,258.34 over a 40 year period.

An Employee Stock Purchase Plan (ESPP). If you are lucky enough to have an ESPP through your employer's benefit plan, you can really tap into some free money. An ESPP allows you to purchase company stock at a discount. Typically the company deducts money from your paycheck (up to 10 percent of your income) for a 6 month period. At the end of that time, you are given options to purchase stock at a discount. You can then hold the options or sell them.

[See How to Find Retirement Savings Advice You Can Trust.]

The key to using the ESPP is to sell (or flip) the stock as soon as you purchase it. ESPP flipping guarantees a solid return on your cash, sometimes as much as a 30 percent annual return. And by quickly dumping the stocks you avoid the common mistake of overloading your investment portfolio with company stock.

Tax-advantaged investing. Free money can also be had by taking advantage of tax incentives from the federal government. Just by investing through your company 401(k), you are getting free money through tax advantages. Money put into a 401(k) is not taxed until retirement. Most employees can contribute up to $16,500 pre-tax dollars annually to their 401(k). If you are in the 15 percent tax bracket, that's an annual savings of $2,475. Now you have even more money to invest.

[Bookmark the U.S. News Retirement site for more planning ideas and advice.]

The great thing about tax-advantaged retirement investing is that it's not just for employees with access to a 401(k). You can get similar tax advantages using a traditional or Roth IRA. Traditional IRAs also allow you to defer taxes on your savings until retirement.  In contrast, a Roth IRA uses after-tax dollars as contributions, but then those contributions grow tax-free and are not taxed upon withdrawal. Imagine how much you could save in future taxes if you put money into this type of account each year until you retire.

Getting free money for retirement isn't hard. You just have to use the tools that are available to you.

Phil Taylor is the author of the popular 52 Ways to Make Extra Money. Find out how to save more money and get the latest news on the best online savings accounts and the best online stock brokers at his blog, PT Money: Personal Finance.