I talked with my banker today, a young guy, who used to work for a major stockbroker. He moved into banking after the frustration of seeing people not make the most of their 401k opportunities.
I asked him what advice he’d give to a young person just starting out. It’s pretty good advice for any of us.
We’re in the season now, aren’t we? The season of telling your employer your benefit choices for next year.
In belated celebration of Ted Benna Day let’s think through the 401k. The 401k is kind of like the Social Security system except that:
Unless you’re sure that the in-the-red Social Security system is going to become much more generous than it is right now, you should use your 401k to maximize your chances for a good financial future.
Years ago, with the amazing John Elway injured midgame, it didn’t seem likely the Broncos could win. The next day the headline about the backup quarterback who saved the day read, “Gary Who?” His promised ride even forgot to give the hero of the day a ride home after the game. These days Gary Kubiak has managed to get people to remember his name. Let’s try to do the same for Ted Benna.
In 1980 Ted Benna pondered the Byzantine details of the tax code and decided that, while the IRS goal was to limit perks of company executives, he could interpret the obscure 401(k) provision to create a retirement plan for the average worker. Even better, he had the idea of companies making matching contributions. 36 years later, 94% of companies offer 401(k)s. Amid endless talk and inaction about saving Social Security, it would be unfortunate to forget that Ted Benna saved the American retirement. These days, instead of a “defined benefit” pension, which gets redefined down by the lucrative practice of companies going bankrupt, most of us have a 401k. Your 401k is your money in your investments under your control. It’s not an asset of your employer’s, subject to their continuing existence. It’s not something the management company can take. It’s yours. (True, any matching contributions not yet vested aren’t yours yet, but don’t quibble.)
Admittedly, a guard cat is ideal in many ways. We rescued a feral cat who takes the business of defending her house very seriously. She growls and runs to the door when the doorbell rings.
Not everyone has Smoggy the Death Cat, so whom should you entrust with your investments?