If you were to advise co-workers about why they should contribute to (and/or maximize) their 401(k)s, what would you say?
I’ll probably just hang around at this job for a few years until I figure out what I really want to do.~me, in 1997
In mid-November, that same kid who wasn't sure what he wanted to do when he grew up will mark 25 years with the same airline. A lot can happen in 25 years, of course. And that goes doubly so for an industry as volatile as aviation. I’ve received a lot of advice over the decades; some good, some bad, some questionable at best.
The best advice I ever received? Start a 401k, and do it today.
In a lot of ways, I was lucky. I started at a line station with only a few flights per day. And it was one of the most senior stations in our network. In many ways, it was a place out of time. The “old” guys were Korean vets. The “young guys” Vietnam. And then there was me– twenty-two years old and not too sure about working with people old enough to be my parents (or grandparents!), but that quickly dissolved.
The men giving me that advice-and in those days, it was 99% men- had vested pensions, but 401k plans didn’t exist when they were in my spot. They had the advantage of seeing, well, the advantage of having one and were going to do whatever it took to convince me of the benefits.
They had decades vested in their pensions. Those same pensions would be frozen a few years later, but they recognized the plan's constraints even before that.
A pension wasn't portable. They weren't leaving, but what if I wanted to?
They didn't control the funding. Someone on the other side of the country they’d never met was controlling their financial destiny.
The multiplier was tied to our collective bargaining agreement. That allowed the company to hold it over the rank and file’s head like a financial sword of Damocles.
A 401k, they told me, was the opposite.
I could fund it the way I wanted and alter that as my life circumstances changed.
I could ramp up my contribution amount each time I moved up our payscale.
I could take it with me if I ever chose to leave.
No one from the company could ever take it back or change the “payout” they way they might with a pension plan multiplier.
A 401k, they told me, was my ticket to financial freedom & would keep me out of the financial handcuffs a pension plan would. It was empowering and would leverage compounding and time. It would work for me even when I wasn't working.
“You're in it for the long haul,” they'd say. “Keep adding a little every paycheck, and it’ll pay off.”
Twenty-five years later, a lot has changed, of course. The industry has been through several shocks to the system. I was at the airport on 9/11. My carrier filed for bankruptcy and then merged with another. We all pushed through the great Financial Collapse of 2008. COVID-19 felt like all of those rolled into one.
Through it all, we endured. And so, too, did my 401k. There were peaks and valleys. And times when I gave serious thought to packing it in. But being in it for the long haul proved to be a calming influence. This became my rational mantra when making financial decisions.
My company offered early retirement packages in the depths of the COVID pandemic. Almost 18,000 people took them up on the offer.For weeks, being at work felt like the last day of school. There were a lot of hugs and too many goodbyes.
The people that had planned ahead financially were in a great spot to retire to the next chapter of their lives. Today they’re thriving; some enjoy being involved grandparents. A couple of former coworkers have gone back to school. Others are finally enjoying the vacations we’re always promised–this is an airline after all-but never quite get around to.
In time those people were replaced by new hires. Many of them are that same fresh-faced 22-year-old I was all those years ago. Many of them are financially savvy but have never had a job offering benefits before. They also know they won't stay in the same career for long. They watched their parents' careers evaporate and, at any rate, are too curious about the world to say in one spot for more than a few years.
And when they start talking about what they’d like to do? I take my cue to give them the same advice about starting a 401k I received all though years ago.