401k "advice" to my associates

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Silver Bullet
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401k "advice" to my associates

Post by Silver Bullet » Wed Sep 12, 2018 3:27 pm

As a principal at our company, I typically talk to our associates each year about the importance of saving for retirement. We have a company sponsored (and contributing) 401k plan and it always amazes me how few of the younger associates don't participate or don't max out their contributions. Our salaries are at/above competitive market rate and most make a good/exceptional income (imho).

I'm getting ready to have that "talk" again this year and recently overheard a few of them chatting about the newest micro-brew that was opening up nearby - and it got me thinking.....(sometimes a dangerous thing!). Not sure how many of you BH'ers frequent micro-brews, but these places are expensive! I can buy a 12 pack of (wait for it...) Silver Bullets for the same price as 1-2 glasses of local liquid gold. Back to my thought process:

If they abstained from 1 micro-brew visit and 1 Starbucks (located next door to our office) trip per week, they could be well on their way to funding their retirement! But of course, they grow tired of the old man preaching from his soap box, hence my post.

Does anyone have any published sources for these types of savings methods? They're probably not going to "read" what I show/send them - so videos/podcasts would be better. If you can post any recommendations, it would be greatly appreciated.

HEDGEFUNDIE
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Re: 401k "advice" to my associates

Post by HEDGEFUNDIE » Wed Sep 12, 2018 3:29 pm

Are you sure you have the full story? They could have student loan or credit card debt to pay down.

Silver Bullet
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Re: 401k "advice" to my associates

Post by Silver Bullet » Wed Sep 12, 2018 3:32 pm

HEDGEFUNDIE wrote:
Wed Sep 12, 2018 3:29 pm
Are you sure you have the full story? They could have student loan or credit card debt to pay down.
No, I'm positive I don't have the full story!

HEDGEFUNDIE
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Re: 401k "advice" to my associates

Post by HEDGEFUNDIE » Wed Sep 12, 2018 3:34 pm

Silver Bullet wrote:
Wed Sep 12, 2018 3:32 pm
HEDGEFUNDIE wrote:
Wed Sep 12, 2018 3:29 pm
Are you sure you have the full story? They could have student loan or credit card debt to pay down.
No, I'm positive I don't have the full story!
Then I would not approach this so aggressively. Tell them to contribute up to the match % or they are giving up free money, and leave it at that.

Jack FFR1846
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Re: 401k "advice" to my associates

Post by Jack FFR1846 » Wed Sep 12, 2018 3:40 pm

Let's say they've got a $300k student loan debt. They're likely not far removed from college, where they did scrimp to get by. Now, they can unwind with a $15 beer with friends on a Friday night and relax after years of all nighters and knowing that their loans are charging so much interest that they won't finish paying them until the day before their parents move to a nursing home at $15k a month, which they'll have to help paying.

I do feel bad for today's new college grads. Us Baby Boomers had it real easy and sort of expect that new grads have it the same easy way. They don't.
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retiredjg
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Re: 401k "advice" to my associates

Post by retiredjg » Wed Sep 12, 2018 3:40 pm

I don't have videos, but....keep preaching! Someone is hearing you now or will recall your words at a later time when they are ready to get serious. The fact that the employer contributes a match is huge because most people can be enticed with free money.

41Fin
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Re: 401k "advice" to my associates

Post by 41Fin » Wed Sep 12, 2018 3:45 pm

Unfortunately for you, people don't change their habits until they have that "Ah-ha" moment and become ready to. No pods/blogs/vlogs or anything else will kick start long term change.

The only thing you really can do (if you can) is make it so that you have to opt out of the 401k match. At my current company, when I started they automatically set my 401k up to the company match. If people never see it from the beginning they won't miss it come pay day.

As far as recommendations, Gary Vaynerchuck(sp) has some good content telling people what to do in their 20s/30s and talking about playing the long game, staying the course and

here are some (not sure if links are ok :shock: )

https://www.youtube.com/watch?v=qRj144Gd7EA for example (Has curse words btw)
Last edited by 41Fin on Wed Sep 12, 2018 3:49 pm, edited 1 time in total.

livesoft
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Re: 401k "advice" to my associates

Post by livesoft » Wed Sep 12, 2018 3:45 pm

Here is an old thread about young people not saving in IRAs:
viewtopic.php?p=3386649#p3386649

You have may legal issues with trying too hard to sell the 401(k) plan, but you can sell using IRAs. Do you have children who work? Maybe they can give you some ideas, too?
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ResearchMed
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Re: 401k "advice" to my associates

Post by ResearchMed » Wed Sep 12, 2018 3:47 pm

HEDGEFUNDIE wrote:
Wed Sep 12, 2018 3:34 pm
Silver Bullet wrote:
Wed Sep 12, 2018 3:32 pm
HEDGEFUNDIE wrote:
Wed Sep 12, 2018 3:29 pm
Are you sure you have the full story? They could have student loan or credit card debt to pay down.
No, I'm positive I don't have the full story!
Then I would not approach this so aggressively. Tell them to contribute up to the match % or they are giving up free money, and leave it at that.
Or just give them the so-called "match" and don't require any employee contribution to be made in order to "match".

This is what our employer does.
Sure, it's a mixed bag. It would be better to have the employer contribution AND the employee contribution.
But better to have something (e.g., the employer's "half") building and compounding over the year, than to have nothing.

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alex_686
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Re: 401k "advice" to my associates

Post by alex_686 » Wed Sep 12, 2018 3:48 pm

Max contribution might be stiff for a starting family - saving for a mortgage, student loans, new kids, etc.

First, there is a fair amount of behavioral evidence that what works is to get people in the door with any contribution amount, and then get them to promise to increase their contribution rate when they get a pay raise.

Second, what about a 5% contribution? Present that. Figure out what the lowest salary of your associates are, round to a nice number, divide buy the number of pay periods, and round again. Lay out 3 simply scenarios. Cash over 20 years, taxable over 20 years, tax free over 20 years. Assume a 5% return and some reasonable tax rate. Show the end results. Hopefully the big pop in numbers will get a few people in the door.

livesoft
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Re: 401k "advice" to my associates

Post by livesoft » Wed Sep 12, 2018 3:49 pm

One reaction might be, "I just wish you would give us a raise instead of a match!"
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JoMoney
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Re: 401k "advice" to my associates

Post by JoMoney » Wed Sep 12, 2018 3:50 pm

To each there own. If a majority viewed common consumption habits as grossly as I do, we would probably be in a economic depression.
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CaliJim
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Re: 401k "advice" to my associates

Post by CaliJim » Wed Sep 12, 2018 4:01 pm

Keep your messages simple. They know how to google and find info on the web when the time comes

Just make is clear that you encourage everyone to participate and make sure they understand how it works.

Points I'd make in your shoes:

1) surprised that participation in the plan is a low as it is, and encourage them to participate
2) how the plan works, who manages it, how the match works, what they need to do to participate, what reports they will get, how the web site works, what investments are available....
4) Give a few examples of good ways to use the plan (ie: asset allocation plan)
5) investment philosophy: (have a plan, start early, lbym, manage risk, diversify, avoid market timing, minimize costs, index rather than active funds...)
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Silver Bullet
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Re: 401k "advice" to my associates

Post by Silver Bullet » Wed Sep 12, 2018 4:11 pm

I've beat these ideas around with my executive team for years. Bottom line, you can lead a horse to water.....yada yada
I love the idea of us (employer) just putting money into their 401k plans - we've actually tried that a couple of times - but then you have a few that haven't gone through the paperwork to even open one up. :?

Bottom line, which I've preached before, I regret not investing early in life. Having a pitcher less each week, putting a little more away when I got a big commission or bonus (big back then was a few hundred/thousand). Just trying to share some of my life experiences to those that will listen.

Livesoft: I hear ya' on the "investment advice" comment. I'm steering clear of making any reference to how/where it's invested. This is solely my opinion on saving for the future.

Silver Bullet
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Re: 401k "advice" to my associates

Post by Silver Bullet » Wed Sep 12, 2018 4:14 pm

CaliJim wrote:
Wed Sep 12, 2018 4:01 pm
Keep your messages simple. They know how to google and find info on the web when the time comes

Just make is clear that you encourage everyone to participate and make sure they understand how it works.

Points I'd make in your shoes:

1) surprised that participation in the plan is a low as it is, and encourage them to participate
2) how the plan works, who manages it, how the match works, what they need to do to participate, what reports they will get, how the web site works, what investments are available....
4) Give a few examples of good ways to use the plan (ie: asset allocation plan)
5) investment philosophy: (have a plan, start early, lbym, manage risk, diversify, avoid market timing, minimize costs, index rather than active funds...)
Thanks.
I'm not comfortable sharing that participation is "low" as people will then shift their focus to "why". For the rest of your list, I typically make opening comments of the importance of "saving for the future" and then turn it over the HR and the outside investment team that comes to our office to present.

billfromct
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Re: 401k "advice" to my associates

Post by billfromct » Wed Sep 12, 2018 4:15 pm

Maybe you could show a comparison of the value of contributing $5,000/year to the 401k with an average 7% return at various ages & an age 65 retirement:
-age 25 (40 years until age 65 retirement) $1,068,048
-age 30 $739,567
-age 40 $338,382
-age 50 $134,440
-age 60 $30,766

I got this from moneychimp.com, simple retirement calculator.

I would think there are some models where you could increase the contribution by, say, $500 or $1,000 each year to get a very impressive age 65 outcome.

bill

retiringwhen
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Re: 401k "advice" to my associates

Post by retiringwhen » Wed Sep 12, 2018 4:18 pm

Does your 401K administrator have any materials you can use? I know Vanguard is always sending me video emails, blogs and newsletters via our company for my plan that encourage various aspects of the value of participating. You may ask them.

BTW, as mentioned above, the aha moment comes at different times for different people. Doing the speech every year and sending the newsletters regularly will eventually get a few more there. In the end, the modern retirement planning system requires some self-motivation and that is not something that can be forced....

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Re: 401k "advice" to my associates

Post by bob60014 » Wed Sep 12, 2018 4:21 pm

As said previously. Even if a handful get the "ah ha" moment later in their career, you most likely helped planting the seed!

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Re: 401k "advice" to my associates

Post by livesoft » Wed Sep 12, 2018 4:25 pm

Silver Bullet wrote:
Wed Sep 12, 2018 4:11 pm
I've beat these ideas around with my executive team for years. Bottom line, you can lead a horse to water.....yada yada
I love the idea of us (employer) just putting money into their 401k plans - we've actually tried that a couple of times - but then you have a few that haven't gone through the paperwork to even open one up. :?
Richard Thaler became a Nobel Laureate partly because of the ideas in Nudge. Laws were changed to allow employers to automatically sign up employees. Yes, they could still Opt-Out, but the default can be Opt-In.
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retiringwhen
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Re: 401k "advice" to my associates

Post by retiringwhen » Wed Sep 12, 2018 4:36 pm

billfromct wrote:
Wed Sep 12, 2018 4:15 pm
Maybe you could show a comparison of the value of contributing $5,000/year to the 401k with an average 7% return at various ages & an age 65 retirement:
-age 25 (40 years until age 65 retirement) $1,068,048
-age 30 $739,567
-age 40 $338,382
-age 50 $134,440
-age 60 $30,766

I got this from moneychimp.com, simple retirement calculator.

I would think there are some models where you could increase the contribution by, say, $500 or $1,000 each year to get a very impressive age 65 outcome.

bill
I gave essentially that pitch to both of my sons as soon as they started to make earned income. They bought it! We'll see if they stay with it.... The $1,000 they put in at age 18 (Roth IRA, yeah!) will likely be work something close to $20K at retirement. keep doing that every year and make the pile bigger!

fishmonger
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Re: 401k "advice" to my associates

Post by fishmonger » Wed Sep 12, 2018 4:37 pm

As mentioned earlier, I'd be careful about pushing it too hard. Would keep it real broad that you offer the benefit and would love to have everyone be a participant. More than that you could get into potential liability territory. Unlikely yes, but you are not a fiduciary and shouldn't act like one.

Took me a while to get used to this at my job. I went from a CPA with my own practice to being a controller for a roofing contractor. See mistakes all the time with the rank and file - hardship withdrawals, not contributing at all or not enough to get the full match, etc. Bottom line it's not my job, as tough as it may be. Most guys spend $10 a day on cigarettes and contribute zero to our retirement plan

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sunny_socal
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Re: 401k "advice" to my associates

Post by sunny_socal » Wed Sep 12, 2018 4:39 pm

livesoft wrote:
Wed Sep 12, 2018 4:25 pm
Silver Bullet wrote:
Wed Sep 12, 2018 4:11 pm
I've beat these ideas around with my executive team for years. Bottom line, you can lead a horse to water.....yada yada
I love the idea of us (employer) just putting money into their 401k plans - we've actually tried that a couple of times - but then you have a few that haven't gone through the paperwork to even open one up. :?
Richard Thaler became a Nobel Laureate partly because of the ideas in Nudge. Laws were changed to allow employers to automatically sign up employees. Yes, they could still Opt-Out, but the default can be Opt-In.
That's how it is at my current Megacorp:
- Everyone automatically signed up at 1% contribution
- Employer contributes a substantial amount (equivalent to 7% match of salary if employee contributes enough)
- Employee contribution increases by 1% a year

Of course you can manually update the enrollment and the contribution if you wish, but those are defaults in the 401k program.

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dm200
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Re: 401k "advice" to my associates

Post by dm200 » Wed Sep 12, 2018 4:47 pm

sunny_socal wrote:
Wed Sep 12, 2018 4:39 pm
livesoft wrote:
Wed Sep 12, 2018 4:25 pm
Silver Bullet wrote:
Wed Sep 12, 2018 4:11 pm
I've beat these ideas around with my executive team for years. Bottom line, you can lead a horse to water.....yada yada
I love the idea of us (employer) just putting money into their 401k plans - we've actually tried that a couple of times - but then you have a few that haven't gone through the paperwork to even open one up. :?
Richard Thaler became a Nobel Laureate partly because of the ideas in Nudge. Laws were changed to allow employers to automatically sign up employees. Yes, they could still Opt-Out, but the default can be Opt-In.
That's how it is at my current Megacorp:
- Everyone automatically signed up at 1% contribution
- Employer contributes a substantial amount (equivalent to 7% match of salary if employee contributes enough)
- Employee contribution increases by 1% a year

Of course you can manually update the enrollment and the contribution if you wish, but those are defaults in the 401k program.
I like this "approach".

ResearchMed
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Re: 401k "advice" to my associates

Post by ResearchMed » Wed Sep 12, 2018 5:01 pm

livesoft wrote:
Wed Sep 12, 2018 4:25 pm
Silver Bullet wrote:
Wed Sep 12, 2018 4:11 pm
I've beat these ideas around with my executive team for years. Bottom line, you can lead a horse to water.....yada yada
I love the idea of us (employer) just putting money into their 401k plans - we've actually tried that a couple of times - but then you have a few that haven't gone through the paperwork to even open one up. :?
Richard Thaler became a Nobel Laureate partly because of the ideas in Nudge. Laws were changed to allow employers to automatically sign up employees. Yes, they could still Opt-Out, but the default can be Opt-In.
I'm not sure it took "laws to change" for employers to "sign up employees" to receive *free* money not requiring a "match".

Way back in the early '80's, I had a one year position that apparently qualified for a 403b (with TIAA-CREF), but I didn't realize it.
A bit later (after I was no longer with that position), I got notification that I needed to select investment choices, which is how I found out about that account in the first place.

RM
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psteinx
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Re: 401k "advice" to my associates

Post by psteinx » Wed Sep 12, 2018 5:15 pm

Silver Bullet wrote:
Wed Sep 12, 2018 3:27 pm
If they abstained from 1 micro-brew visit and 1 Starbucks (located next door to our office) trip per week, they could be well on their way to funding their retirement!
I'm frankly tired of these "skip a Starbucks a day and in 30 years you'll be a gazillionaire!" type stories.

The AFTER-INFLATION, pre-tax, pre-fees expected returns on cash/CDs is ~0%, on bonds maybe 1-2%, and on stocks maybe 5%, 6% if you're feeling generous.

Deduct taxes (not applicable for many retirement accounts, but still).

Deduct fees.

Assume that investor behavior will be imperfect - not necessarily selling in 2008 and waiting until 2016 to buy back, but just the assorted mistakes noob investors make, including using overpriced funds with a good track record, having too little in equities (IMO), and so on.

Combine all this, and the real purchasing power of a latte skipped today is, perhaps, 2 lattes in 30 years or so. Is that progress? Yeah, but it's not really a hockey stick chart that is so often shown.

Further add in the fact that folks in their 20s are near their career lows in income, but near their career highs in real expenses needed (house, replacement for beater college car, all the possessions of starting life, and so on), and I think oldsters can harp too much on deferred gratification for the young.

OTOH, I think a lot of young folks waste their money on frivolities. But the applicable point is perhaps not, "you should skip a latte today so you can have two lattes when you're 60", but rather, "You should think hard about which expenses really add to your life enjoyment. Avoid rapid hedonic adjustment to new income. Save some, to A) Get in the habit, B) Be able to ride out, easier, the rough patches of being young, and C) Take reasonable advantage of tax incentives, company matches, and the like."

retiringwhen
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Re: 401k "advice" to my associates

Post by retiringwhen » Wed Sep 12, 2018 5:21 pm

psteinx wrote:
Wed Sep 12, 2018 5:15 pm
Silver Bullet wrote:
Wed Sep 12, 2018 3:27 pm
If they abstained from 1 micro-brew visit and 1 Starbucks (located next door to our office) trip per week, they could be well on their way to funding their retirement!
I'm frankly tired of these "skip a Starbucks a day and in 30 years you'll be a gazillionaire!" type stories.

The AFTER-INFLATION, pre-tax, pre-fees expected returns on cash/CDs is ~0%, on bonds maybe 1-2%, and on stocks maybe 5%, 6% if you're feeling generous.

Deduct taxes (not applicable for many retirement accounts, but still).

Deduct fees.

Assume that investor behavior will be imperfect - not necessarily selling in 2008 and waiting until 2016 to buy back, but just the assorted mistakes noob investors make, including using overpriced funds with a good track record, having too little in equities (IMO), and so on.

Combine all this, and the real purchasing power of a latte skipped today is, perhaps, 2 lattes in 30 years or so. Is that progress? Yeah, but it's not really a hockey stick chart that is so often shown.

Further add in the fact that folks in their 20s are near their career lows in income, but near their career highs in real expenses needed (house, replacement for beater college car, all the possessions of starting life, and so on), and I think oldsters can harp too much on deferred gratification for the young.

OTOH, I think a lot of young folks waste their money on frivolities. But the applicable point is perhaps not, "you should skip a latte today so you can have two lattes when you're 60", but rather, "You should think hard about which expenses really add to your life enjoyment. Avoid rapid hedonic adjustment to new income. Save some, to A) Get in the habit, B) Be able to ride out, easier, the rough patches of being young, and C) Take reasonable advantage of tax incentives, company matches, and the like."
your analysis would look different if you thought about it this way.

you don't buy any daily latte's for 45 years, but at age 65 you can get a latte a day in perpetuity from the regular returns provided by the investment funded by the foregone drinks. That is a very different calculation. you aren't going to get rich, but you can retire in comfort.

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Re: 401k "advice" to my associates

Post by Murgatroyd » Wed Sep 12, 2018 6:28 pm

SB, you are doing the right thing for the right reasons. A few responses have encouraged some automatic company driven policies. I would suggest you determine how much the company can afford on an ongoing basis and fund everyone’s account by the same percentage. Let’s assume it’s 1%. Automatic and vested. Then everyone will participate and will see how it compounds. You might also consider year end contributions if the company has a good year. Keep it simple.

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Re: 401k "advice" to my associates

Post by dm200 » Wed Sep 12, 2018 6:32 pm

Murgatroyd wrote:
Wed Sep 12, 2018 6:28 pm
SB, you are doing the right thing for the right reasons. A few responses have encouraged some automatic company driven policies. I would suggest you determine how much the company can afford on an ongoing basis and fund everyone’s account by the same percentage. Let’s assume it’s 1%. Automatic and vested. Then everyone will participate and will see how it compounds. You might also consider year end contributions if the company has a good year. Keep it simple.
Also, I would do the best I could to meet the requirements so that no "highly compensated" employees are restricted in funding their 401k accounts.

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Re: 401k "advice" to my associates

Post by getthatmarshmallow » Wed Sep 12, 2018 6:43 pm

I don't think the skip-a-latte advice is all that great, and I remember at that age finding it somewhat insulting, to be honest. The idea that if anyone has any discretionary money they're an irresponsible slacker who needs to be educated really isn't a fair assumption, and however well intentioned, that's how the advice to skip-a-latte (or whatever) often comes across. What if that $15 a week is their only entertainment because they've cut the fat everywhere else because rents are through the roof and they have hundreds every month in student loans to pay back and they're building an emergency fund? Are you recommending that they sell their cars and get roommates? Because that will save them a lot more, and more quickly, than skipping microbeer night. But I suspect you'd rightly think that telling them how to manage cars and apartment would be overstepping it.

If you're in charge of the options, automatically contributing the employer percentage or making enrollment in the plan opt-out would have a far greater effect. If you're just going to do the presentation, explain that not getting the match is leaving money on the table, and let them know how to participate.

retiringwhen
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Re: 401k "advice" to my associates

Post by retiringwhen » Wed Sep 12, 2018 6:50 pm

getthatmarshmallow wrote:
Wed Sep 12, 2018 6:43 pm
I don't think the skip-a-latte advice is all that great, and I remember at that age finding it somewhat insulting, to be honest. The idea that if anyone has any discretionary money they're an irresponsible slacker who needs to be educated really isn't a fair assumption, and however well intentioned, that's how the advice to skip-a-latte (or whatever) often comes across. What if that $15 a week is their only entertainment because they've cut the fat everywhere else because rents are through the roof and they have hundreds every month in student loans to pay back and they're building an emergency fund? Are you recommending that they sell their cars and get roommates? Because that will save them a lot more, and more quickly, than skipping microbeer night. But I suspect you'd rightly think that telling them how to manage cars and apartment would be overstepping it.

If you're in charge of the options, automatically contributing the employer percentage or making enrollment in the plan opt-out would have a far greater effect. If you're just going to do the presentation, explain that not getting the match is leaving money on the table, and let them know how to participate.
Everyone within normative limits has some slack, that is the point. It is not patronizing to encourage folks to be introspective about priorities, spending habits and long term goals.

retiringwhen
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Re: 401k "advice" to my associates

Post by retiringwhen » Wed Sep 12, 2018 6:51 pm

getthatmarshmallow wrote:
Wed Sep 12, 2018 6:43 pm
I don't think the skip-a-latte advice is all that great, and I remember at that age finding it somewhat insulting, to be honest. The idea that if anyone has any discretionary money they're an irresponsible slacker who needs to be educated really isn't a fair assumption, and however well intentioned, that's how the advice to skip-a-latte (or whatever) often comes across. What if that $15 a week is their only entertainment because they've cut the fat everywhere else because rents are through the roof and they have hundreds every month in student loans to pay back and they're building an emergency fund? Are you recommending that they sell their cars and get roommates? Because that will save them a lot more, and more quickly, than skipping microbeer night. But I suspect you'd rightly think that telling them how to manage cars and apartment would be overstepping it.

If you're in charge of the options, automatically contributing the employer percentage or making enrollment in the plan opt-out would have a far greater effect. If you're just going to do the presentation, explain that not getting the match is leaving money on the table, and let them know how to participate.
Everyone within normative limits has some slack, that is the point. It is not patronizing to encourage folks to be introspective about priorities, spending habits and long term goals.

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Re: 401k "advice" to my associates

Post by dknightd » Wed Sep 12, 2018 6:57 pm

HEDGEFUNDIE wrote:
Wed Sep 12, 2018 3:34 pm

Then I would not approach this so aggressively. Tell them to contribute up to the match % or they are giving up free money, and leave it at that.
That is what I'd do. Let them decide if they want to take free money or not! Just keep to the facts, let them decide!

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Re: 401k "advice" to my associates

Post by stimulacra » Wed Sep 12, 2018 6:58 pm

Frontline's Retirement Gamble would be a good movie to watch for a catered lunch or pizza. I've personally convinced a half-dozen people to participate in their employers 401k and a few others to switch over the Vanguard (John Bogle came off as the only honest advisor of all those interviewed).

Other than that, there's not a lot you can do. If the thought of leaving money on the table argument falls on deaf ears, you did what you could.

Now they might be in a position where they can't afford to participate, or that retirement is so far off they still have decades to procrastinate. Maybe in that case you can contribute half of the match automatically regardless if they participate or not. Like say if the match is 8%, do 4% automatically no strings attached and match up to 8% at a fractional rate.

Now I am curious to learn from an employer's or director's perspective; when you find out that an employee or a direct report does not participate in the company's 401k or is not financially savvy or frugal… does that diminish your opinion of them as a professional? Even if very subtly?

Mr.Mosfet
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Re: 401k "advice" to my associates

Post by Mr.Mosfet » Wed Sep 12, 2018 7:09 pm

I've found that providing an immediate reward is good way to motivate and modify behaviors. For younger engineers and new hires that I've mentored I've offered $50 cash to open up the 401k account and enroll in a other employee benefits. I don't monitor their accounts or try to influence contribution amounts, I just make the offer and pay-up if they tell me it's done. I also had two co-workers quit smoking after I offered them $1,000, one of them quit within 4-months the other took two years (I was happy when they came to collect payment)

This is all out of my own pocket, so I'm not sure what restrictions may be in place for a business to do the same.

dknightd
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Re: 401k "advice" to my associates

Post by dknightd » Wed Sep 12, 2018 7:12 pm

stimulacra wrote:
Wed Sep 12, 2018 6:58 pm

Now I am curious to learn from an employer's or director's perspective; when you find out that an employee or a direct report does not participate in the company's 401k or is not financially savvy or frugal… does that diminish your opinion of them as a professional? Even if very subtly?
I would hope that this information is confidential. But you never know these days. You could have a subordinate that has been saving for years, and has more money than you, or you could have a subordinate that plans to work until they die. This is their business, not yours.

jef
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Re: 401k "advice" to my associates

Post by jef » Wed Sep 12, 2018 9:37 pm

When I was 30, the CEO of my company reminded us to "Pay yourself first". That suggestion along with seeing charts about saving early and compounding that were provided by our 401K provider convinced me to have automatic deductions from my paycheck to a 401K. As I approach retirement age, I'm thankful I received that advice. Many of your associates trust and respect you. Just give them simple, sound advice. They won't all take it, but many will.

pennylane
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Re: 401k "advice" to my associates

Post by pennylane » Wed Sep 12, 2018 9:47 pm

Jack FFR1846 wrote:
Wed Sep 12, 2018 3:40 pm
Let's say they've got a $300k student loan debt. They're likely not far removed from college, where they did scrimp to get by. Now, they can unwind with a $15 beer with friends on a Friday night and relax after years of all nighters and knowing that their loans are charging so much interest that they won't finish paying them until the day before their parents move to a nursing home at $15k a month, which they'll have to help paying.

I do feel bad for today's new college grads. Us Baby Boomers had it real easy and sort of expect that new grads have it the same easy way. They don't.
I think you might be the first baby boomer to actually admit you had it easy. Baby boomers usually always complaining about milenials

Dottie57
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Re: 401k "advice" to my associates

Post by Dottie57 » Wed Sep 12, 2018 9:49 pm

When I was newly graduated, I didn’t have debt , but was “hungry” for material things. Car, apartment, stereo etc. I am pretty sure Retirement was not a priority. The young in your firm will wake up sometime and start down the road to investing for retirement.

Dottie57
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Re: 401k "advice" to my associates

Post by Dottie57 » Wed Sep 12, 2018 10:33 pm

bob60014 wrote:
Wed Sep 12, 2018 4:21 pm
As said previously. Even if a handful get the "ah ha" moment later in their career, you most likely helped planting the seed!
Hearing the message over and over does help.

BBailey
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Re: 401k "advice" to my associates

Post by BBailey » Wed Sep 12, 2018 11:10 pm

Jack FFR1846 wrote:
Wed Sep 12, 2018 3:40 pm
Let's say they've got a $300k student loan debt. They're likely not far removed from college, where they did scrimp to get by. Now, they can unwind with a $15 beer with friends on a Friday night and relax after years of all nighters and knowing that their loans are charging so much interest that they won't finish paying them until the day before their parents move to a nursing home at $15k a month, which they'll have to help paying.

I do feel bad for today's new college grads. Us Baby Boomers had it real easy and sort of expect that new grads have it the same easy way. They don't.
I just left a job at a University. There are so many resort college apartment complexes in this town its like living in Cozumel or Aspen. I get that some of your post was tongue in cheek, but kids leaving college with $300k in loans weren't even close to scrimping by.

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Eagle33
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Re: 401k "advice" to my associates

Post by Eagle33 » Thu Sep 13, 2018 2:07 am

I read an article recently (I don't remember where :( ) that gave an example of 2 people starting at 25yo with the first saving X each month into 401k for 10 years then stop contributing. The other delayed contributing until 35yo and continue X/per month for the next 30 years. The example compared the amount contributed by each and what each was worth at 65yo - assumed the same annual rate of return.

This power of compounding example reminded me of a similar example years ago that helped me comprehend compounding. And it is easy for people to add the 2 example balances together to see the sum if contributed monthly for all 40 years.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.

lazydavid
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Re: 401k "advice" to my associates

Post by lazydavid » Thu Sep 13, 2018 7:42 am

Silver Bullet wrote:
Wed Sep 12, 2018 4:14 pm
Thanks.
I'm not comfortable sharing that participation is "low" as people will then shift their focus to "why". For the rest of your list, I typically make opening comments of the importance of "saving for the future" and then turn it over the HR and the outside investment team that comes to our office to present.
If you redefine "low" as "<100%", it might not be a big issue.
dm200 wrote:
Wed Sep 12, 2018 6:32 pm
Murgatroyd wrote:
Wed Sep 12, 2018 6:28 pm
SB, you are doing the right thing for the right reasons. A few responses have encouraged some automatic company driven policies. I would suggest you determine how much the company can afford on an ongoing basis and fund everyone’s account by the same percentage. Let’s assume it’s 1%. Automatic and vested. Then everyone will participate and will see how it compounds. You might also consider year end contributions if the company has a good year. Keep it simple.
Also, I would do the best I could to meet the requirements so that no "highly compensated" employees are restricted in funding their 401k accounts.
Agreed, I'm dealing with this now and it's a pain in my ass. All it takes is either a 3% non-elective contribution, or a 100% match on the first 4% to get safe harbor status and eliminate HCE limitations.

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goingup
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Re: 401k "advice" to my associates

Post by goingup » Thu Sep 13, 2018 7:59 am

getthatmarshmallow wrote:
Wed Sep 12, 2018 6:43 pm
I don't think the skip-a-latte advice is all that great, and I remember at that age finding it somewhat insulting, to be honest. The idea that if anyone has any discretionary money they're an irresponsible slacker who needs to be educated really isn't a fair assumption, and however well intentioned, that's how the advice to skip-a-latte (or whatever) often comes across.
I agree. Skip the micro-brew and latte (shaming) example. That message is a turn-off and you may lose your audience at the start.

Talk about the power of early saving and compounding. Tax advantages (everybody loves that), and free matching money. If your company doesn't have 401K enrollment as the default, they probably should.

annielouise
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Re: 401k "advice" to my associates

Post by annielouise » Thu Sep 13, 2018 8:04 am

HEDGEFUNDIE wrote:
Wed Sep 12, 2018 3:34 pm
Silver Bullet wrote:
Wed Sep 12, 2018 3:32 pm
HEDGEFUNDIE wrote:
Wed Sep 12, 2018 3:29 pm
Are you sure you have the full story? They could have student loan or credit card debt to pay down.
No, I'm positive I don't have the full story!
Then I would not approach this so aggressively. Tell them to contribute up to the match % or they are giving up free money, and leave it at that.
I always found "part of your salary" an easier sell than "free money".

KlangFool
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Re: 401k "advice" to my associates

Post by KlangFool » Thu Sep 13, 2018 8:11 am

Silver Bullet wrote:
Wed Sep 12, 2018 3:27 pm
As a principal at our company, I typically talk to our associates each year about the importance of saving for retirement. We have a company sponsored (and contributing) 401k plan and it always amazes me how few of the younger associates don't participate or don't max out their contributions. Our salaries are at/above competitive market rate and most make a good/exceptional income (imho).
Silver Bullet,

That is the whole problem. IMHO, you have a better shot at convincing some young folks if you talk about saving for Financial Independence / Financial Freedom. Retirement is 20 to 30 years away in unknown future. Financial Independence / Financial Freedom is a more immediate goal.

KlangFool

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Re: 401k "advice" to my associates

Post by KlangFool » Thu Sep 13, 2018 8:14 am

retiringwhen wrote:
Wed Sep 12, 2018 5:21 pm

your analysis would look different if you thought about it this way.

you don't buy any daily latte's for 45 years, but at age 65 you can get a latte a day in perpetuity from the regular returns provided by the investment funded by the foregone drinks. That is a very different calculation. you aren't going to get rich, but you can retire in comfort.
retiringwhen,

Except at 65, you can no longer drink or taste coffee at all. Or, much earlier than that.

KlangFool

KlangFool
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Re: 401k "advice" to my associates

Post by KlangFool » Thu Sep 13, 2018 8:17 am

OP,

If you are really interested in helping your associates, set up a default contribution rate to a target date fund. As per study that I heard about, this option drives 401K contribution more than anything else.

KlangFool

getthatmarshmallow
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Re: 401k "advice" to my associates

Post by getthatmarshmallow » Thu Sep 13, 2018 8:31 am

retiringwhen wrote:
Wed Sep 12, 2018 6:50 pm
getthatmarshmallow wrote:
Wed Sep 12, 2018 6:43 pm
I don't think the skip-a-latte advice is all that great, and I remember at that age finding it somewhat insulting, to be honest. The idea that if anyone has any discretionary money they're an irresponsible slacker who needs to be educated really isn't a fair assumption, and however well intentioned, that's how the advice to skip-a-latte (or whatever) often comes across. What if that $15 a week is their only entertainment because they've cut the fat everywhere else because rents are through the roof and they have hundreds every month in student loans to pay back and they're building an emergency fund? Are you recommending that they sell their cars and get roommates? Because that will save them a lot more, and more quickly, than skipping microbeer night. But I suspect you'd rightly think that telling them how to manage cars and apartment would be overstepping it.

If you're in charge of the options, automatically contributing the employer percentage or making enrollment in the plan opt-out would have a far greater effect. If you're just going to do the presentation, explain that not getting the match is leaving money on the table, and let them know how to participate.
Everyone within normative limits has some slack, that is the point. It is not patronizing to encourage folks to be introspective about priorities, spending habits and long term goals.
With respect, I disagree that that's what the advice conveys. You're right that anyone in the target audience likely has some slack in budget. But encouraging one to skip-at-latte doesn't come across as encouraging someone to be introspective, but as a scold, given how often giving up tiny luxuries is touted in the media as the key to financial independence all out of proportion to their actual effect. It would be far more effective for the boss to scold anyone with a new car and point out that they could have maxed their 401K with the money they'd save buying a beater, but I think we see clearly that would be out of line, and I think the latte advice is so cliche it's coming close.

I think that's a bad position to take up as a boss who has limited information.

smitcat
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Re: 401k "advice" to my associates

Post by smitcat » Thu Sep 13, 2018 8:36 am

Silver Bullet wrote:
Wed Sep 12, 2018 4:14 pm
CaliJim wrote:
Wed Sep 12, 2018 4:01 pm
Keep your messages simple. They know how to google and find info on the web when the time comes

Just make is clear that you encourage everyone to participate and make sure they understand how it works.

Points I'd make in your shoes:

1) surprised that participation in the plan is a low as it is, and encourage them to participate
2) how the plan works, who manages it, how the match works, what they need to do to participate, what reports they will get, how the web site works, what investments are available....
4) Give a few examples of good ways to use the plan (ie: asset allocation plan)
5) investment philosophy: (have a plan, start early, lbym, manage risk, diversify, avoid market timing, minimize costs, index rather than active funds...)
Thanks.
I'm not comfortable sharing that participation is "low" as people will then shift their focus to "why". For the rest of your list, I typically make opening comments of the importance of "saving for the future" and then turn it over the HR and the outside investment team that comes to our office to present.
IMHO you should just do the best you can at the meetings and then do not waste your time on folks that will not participate. Your best efforts at a meeting will reach any and all folks that will participate and benefit from the 401k program and the rest will absorb a huge amount of your time and never fully participate. I have been doing this for quite a long time and the pattern repeats each year and reinforcing the results from the past. In experience the fringe employees that you manage to cajole, scare, bride , auto enroll, or otherwise recruit without them being committed will enventually stop the 401K , take loans, remove the funds and pay penalties or take the funds rather than rolling them over upon leaving the company.
My thoughts revolve around a very good information drop before employment from HR, patient meetings for 401K plan, and a lot of time spent wih those that are self motivated after those steps. Good luck with whatever you decide.

mmmodem
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Re: 401k "advice" to my associates

Post by mmmodem » Thu Sep 13, 2018 8:41 am

When I first started my career, I didn't know where to invest and would have loved to have received some sort of guidance in a seminar not held by the investment company most likely to benefit from the fees I'd be paying them. In other words, what your doing is fantastic. There are a lot of young people that just don't care about saving. But more than a few coworkers have come to me for advice over the years. While they may not be a majority there are some who can save but don't know how to.

I would take a page from yearly health insurance enrollment. The material is dry and you're not going to convince people who are not interested, anyway. What you want to do is play the numbers and get as many people in the door as possible. Make it loud so everyone knows about it and spreads the word that you there is a credible source in the company to consult on financial health.

These are the incentives I get me to care about health enrollment besides being mandatory.

1. Free lunch seminars, this usually packs the room
2. Free swag at the seminars
3. Raffle prizes, perhaps a six pack of Silver Bullet
4. Monetary incentives for completing online health assessments. The amount is paid into the HSA. You could do the same for financial health paid into the 401k
5. No smoking commitment decreases premium.

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