Do You Know Your 401k?
My co-workers and I caught up at the water cooler. The big news is our 401k was changing custodians. This sparked an interesting, but unexpected discussion about retirement.
I’ve worked with Bubba and Sherlock for a few years. I still remember years ago when I convinced Bubba to put a small percentage of his paycheck into our company retirement plan. Ironically, after my conversion to public transportation, I convinced Bubba to go Metro, too. I just sat back as he passionately tried to convince Sherlock to contribute to his 401k. For a moment, I felt like a proud teacher or coach.
Sherlock, like his namesake, is very intelligent and quite savvy. He’s already a homeowner and seemed pretty knowledgeable about real estate, taxes, and general investments. As we continued to talk, I discovered he only knew half the story.
He understood money is put away pre-taxed, but that’s all he knew. He thought the 401k was a fund that sat on the side and would be available when we retire. He ranted I could be using that money to earn interest. “Why would I want those funds just sitting around?” I saw my opportunity to strike and explained to him about using those pre-taxed funds and buying into investment vehicles depending on his risk tolerance. Look out Sam Waterston and EF Hutton! He was unaware that he could use those funds to invest. His eyes lit up. Houston, we have lift off!
Bubba chimed in that he started slow and has been increasing his contributions year after year. The good news is Sherlock was very open-minded and after hearing both of our sides, would look into starting up his 401k. I initially thought my blog would be my vessel to educate, inspire, and entertain. I was pleasantly surprised and fulfilled when I achieved my goal, albeit a small one, offline. Although the stock market is a little volatile right now, everyone should contribute whatever they can into their company’s 401k. Besides the tax benefits, over the long run, the stock market should provide returns way better than what you could get in a savings account. If you are interested, I suggest you speak with your HR department or whoever is responsible for your company’s retirement plan. If your friend or co-worker is unclear about something you know about, give him or her a little nudge, you might make a big difference.
Speaking of inspiring, check out Prairie Eco-Thifter’s How to Inspire Others.