Jack Towarnicky, Aequum
If you were to advise co-workers about why they should contribute to (and/or maximize) their 401(k)s, what would you say?
Since 1984, I have participated in seven plans with pre-tax contribution capability. Each had its own features, eligibility, investments, and payout provisions. However, all of them provided me access to a plan that helped ensure I could easily develop a savings habit - starting in my 30's and continuing for over 3 decades, to this day. Concurrently, my wife has also been an active saver via pre-tax contributions in a retirement savings plan. As a result, we have a lifetime of savings in 401k and 403b plans, and this son of a firefighter is certain to become part of a middle-class millionaire household.
Like many American households, our financial journey wasn't always a straight line. So, on more than one occasion, I had to borrow from my plan. As a homeowner, my plan allowed me to take a "Second residence" loan, where I executed a mortgage. Effectively, it operated like a home equity loan using 401k assets. At the end of each year, I received a Form 1098 so I could take a tax deduction on our tax return for the interest I paid to my own 401k account.
Plan loan principal became a fixed income investment in my household. The interest rate I paid exceeded the investment earnings on other fixed income investments in the plan, while, at the same time, it was less than the interest rate I would have paid on a commercial home equity loan. Effectively, it was like making additional tax-deductible contributions. And, given all of the above, it actually improved both our retirement savings and our household wealth.
So, my 401k plan was a source of "financial wellness" throughout my working career - providing "liquidity without leakage along the way to and throughout retirement."
What actions have you taken to inspire non-participants to participate in the 401(k)? Please explain, being as specific and detailed as possible.
I have offered co-workers many reasons to participate in our 401k plan. Included are suggestions such as: (1) You can't afford not to participate, and (2) Don't miss out, don't "leave money on the table." At one point, we had named the 401(k) the "Incentive Savings Plan" - which, in my discussions and presentations, I restated as "I Should Participate." However, among the many different reasons and details I offered to co-workers, my favorite was always: "Will you be a 401k middleclass millionaire, someday?" I developed a presentation, including a "magic show." I was able to demonstrate, using actual non-executive participants in my plan (de-identified of course) that, based on past savings activity and current elections, they were on track to become 401k middle class millionaires. I often delivered that "magic show" as part of new employee orientation. Many new hires, on their very first day, were shocked when I confirmed: “Someday you won’t work here” and “Don’t miss out.” We showed them how contributing to a 401k was a simple way to save. The “magic show” included audience participation. We did not saw anyone in half, but we did use a “magic” top hat and a magician’s wand to demonstrate plan mechanics. Audience volunteers would be asked to risk 70 cents or $2.00, put it in the hat (as if it were a 401k account), and while others observed, watch it magically multiply because of deferred federal and state withholding, employer match, investments and compound earnings, liquidity without leakage, etc. Typically, the 70 cents and $2.00 from "net pay" grew into a $2.00 or $5.00 account after just one year. The goal was to ensure that everyone understood how to perform this same “trick” every payday. It was also to confirm that the only place where these new hires could be treated this handsomely was in our 401k because, you work here! We then performed a second trick - demonstrating how the plan might be the only tool a worker needed to fashion their financial/wealth destiny and become 401k “middle-class millionaires” someday. Not once did we mention “retirement.” The presentation concluded with me giving away all the money added to the top hat to drive home the point that those who participateget the money, and those who don’t, don’t.
Since 1984, I have participated in seven plans with pre-tax contribution capability. Each had its own features, eligibility, investments, and payout provisions. However, all of them provided me access to a plan that helped ensure I could easily develop a savings habit - starting in my 30's and continuing for over 3 decades, to this day. Concurrently, my wife has also been an active saver via pre-tax contributions in a retirement savings plan. As a result, we have a lifetime of savings in 401k and 403b plans, and this son of a firefighter is certain to become part of a middle-class millionaire household.
Like many American households, our financial journey wasn't always a straight line. So, on more than one occasion, I had to borrow from my plan. As a homeowner, my plan allowed me to take a "Second residence" loan, where I executed a mortgage. Effectively, it operated like a home equity loan using 401k assets. At the end of each year, I received a Form 1098 so I could take a tax deduction on our tax return for the interest I paid to my own 401k account.
Plan loan principal became a fixed income investment in my household. The interest rate I paid exceeded the investment earnings on other fixed income investments in the plan, while, at the same time, it was less than the interest rate I would have paid on a commercial home equity loan. Effectively, it was like making additional tax-deductible contributions. And, given all of the above, it actually improved both our retirement savings and our household wealth.
So, my 401k plan was a source of "financial wellness" throughout my working career - providing "liquidity without leakage along the way to and throughout retirement."
What actions have you taken to inspire non-participants to participate in the 401(k)? Please explain, being as specific and detailed as possible.
I have offered co-workers many reasons to participate in our 401k plan. Included are suggestions such as: (1) You can't afford not to participate, and (2) Don't miss out, don't "leave money on the table." At one point, we had named the 401(k) the "Incentive Savings Plan" - which, in my discussions and presentations, I restated as "I Should Participate." However, among the many different reasons and details I offered to co-workers, my favorite was always: "Will you be a 401k middleclass millionaire, someday?" I developed a presentation, including a "magic show." I was able to demonstrate, using actual non-executive participants in my plan (de-identified of course) that, based on past savings activity and current elections, they were on track to become 401k middle class millionaires. I often delivered that "magic show" as part of new employee orientation. Many new hires, on their very first day, were shocked when I confirmed: “Someday you won’t work here” and “Don’t miss out.” We showed them how contributing to a 401k was a simple way to save. The “magic show” included audience participation. We did not saw anyone in half, but we did use a “magic” top hat and a magician’s wand to demonstrate plan mechanics. Audience volunteers would be asked to risk 70 cents or $2.00, put it in the hat (as if it were a 401k account), and while others observed, watch it magically multiply because of deferred federal and state withholding, employer match, investments and compound earnings, liquidity without leakage, etc. Typically, the 70 cents and $2.00 from "net pay" grew into a $2.00 or $5.00 account after just one year. The goal was to ensure that everyone understood how to perform this same “trick” every payday. It was also to confirm that the only place where these new hires could be treated this handsomely was in our 401k because, you work here! We then performed a second trick - demonstrating how the plan might be the only tool a worker needed to fashion their financial/wealth destiny and become 401k “middle-class millionaires” someday. Not once did we mention “retirement.” The presentation concluded with me giving away all the money added to the top hat to drive home the point that those who participateget the money, and those who don’t, don’t.