I was having lunch with some co-workers recently, and an older co-worker was talking about taking a loan from his 401k plan to help with a downpayment on a new house (an interesting idea for a future post). To my surprise, two of my other coworkers with me, who started work the same time as I, replied “401k? We’re not even enrolled.”. I was totally stunned. I mean, these guys are within a year or two of my age, single, and one of them even lives at home! We’ve all been working at least two years, so even with student loans there’s no way they can’t afford to save some of their current income.
The killer? Our company generously matches the first 6% you put in our 401k, dollar for dollar. Granted it doesn’t fully vest for 5 years, but still, that’s 6% free money! For them, that’s almost like getting an IRA fully funded automatically every year. Sigh.
The drop-dead-and-kick-you-in-your-pants killer? They don’t even know the match exists. They figure that they will starting thinking about retirement when they “settle down” with a wife, etc. And they aren’t the only one. According an article in Kiplinger’s Personal Finance this month, $89 million dollars of employer matches were left on the table in 2003. $89 million! This also makes me doubt the ability of people to manage their own social security accounts, but I don’t want to get into that. For now, I just want to encourage everyone out there who hasn’t signed up for their company’s 401k to at least talk to the HR person and see what they are missing. They are usually very nice and happy to talk with you. Please.