All too often I talk with clients who have the opportunity to participate in their company-sponsored 401(k) and simply don’t.

“Even when there’s a match?” I ask.

“I can’t afford it,” they claim.

“You can’t afford not to,” I retaliate.

When a company offers a plan that allows you to contribute to your retirement in a tax-deductible manner (withdrawals are often taxable), it behooves you to take advantage, especially when they offer a matching program.

Don’t pass on the free cash!

You see, there are two distinct reasons for one to contribute to a 401(k) at work. The first is the contribution limit; the second, a company match. In 2007, eligible participants under the age of 50 are allowed to defer and deduct up to $15,000 of their income, not including any employer-matching funds. If you are over the age of 50, you may qualify for what’s called the “catch-up provision.” This allows eligible participants who have reached the half-century mark to accelerate their contributions by another $5,000 per year for a total of $20,000 or 100% of your earned income from that company, whichever is less. Who says there aren’t advantages to getting older?

But the significant advantage is the match, should your company offer it. If they don’t, ask them why. As you place monies in your retirement account at work, the employer can benefit by matching the contributions you and your fellow co-workers’ make to retirement accounts. This often results in more tax deductions and lower turnover for the employer, meanwhile you get more free money.

Here’s how the match breaks down.

If you were to put $100,000 into a savings account, the bank may offer 3% (remember inflation averages almost 5% over the past 50 years, according to the Consumer Price Index). Should you put those monies into a professionally managed mutual fund spread over multiple asset classes, (which is offered through most company-sponsored 401k plans), the average over the past 50 years was almost 12%. While there are no guarantees in the market, if you consider inflation, you are almost guaranteed to lose at the bank. Furthermore, with an employer match, let’s just say they offer 50-cents-on-the-dollar for every dollar you contribute (typically up to a certain percentage, say 6%), you are now getting a 50% rate of return even before it hits the market. Sometimes employers offer 25% match, sometimes 75%, sometimes 100%. Whichever the offering, this is free money many are walking away from. Guaranteed money.

Bank — 3%

Stock/Bond Market — 12% (no guarantees)

Employer Match — 50% (depending on the match)

When you throw in the part where the government chips in (your deduction), you are looking at the possibility of pitching in to an account that others have contributed the majority to. All of this just to encourage you to plan for yourself.

How much more do you need to get started?