Planting Bad Seeds

Ken Cutler

WHEN I WAS A YOUNG engineer, I supervised a charismatic worker named Neil, who was a sort of pied piper to the younger engineers and technicians in our group. He was about 20 years older than us and loved to dispense advice like a guru.

His quirky advice usually had a financial component. For example, he recommended that we single guys marry women with curly hair, as that would save tens of thousands of dollars over the course of the marriage, thanks to fewer trips to the beauty parlor. He even had a calculation he’d use to support his theory. He also told us about his scheme to help expand his wife’s cleaning business, which in turn would allow him to ramp down the time he spent working, an activity he seemed to have an aversion to.

“Just planting seeds,” he liked to say after sharing his latest idea.

Another idea he regularly tried to plant: The 401(k) was one of the biggest scams ever foisted on the public by the government. The basis for his argument seemed to be looming legislation that would somehow means-test Social Security, thereby reducing or eliminating payments to those who had their own means, such as money in 401(k)s. “You’re just funding your own Social Security,” he would tell us young guys.

This was well before the internet was available as a fact-checking resource, and Neil spoke confidently, indicating he had really looked into these things. Unlike his chauvinistic views on marriage, which we discounted, some of us had an uneasy feeling he might be on to something with his 401(k) argument.

The company made new employees wait two years before they could participate in the 401(k) plan, and it didn’t provide any matching contribution. Needless to say, many of us young employees weren’t very enthusiastic about availing ourselves of this benefit. For years, I put in 2.5% of my salary, reasoning that I could at least spare an hour of pay each week, on the off chance that Neil turned out to be wrong.

Today, we’re constantly reminded of the importance of saving early to take advantage of the “magical power of compound interest over time.” Front-loading your 401(k) is so much more effective than ramping up your contributions at the end of your career. But because of the seeds that Neil had planted, coupled with my own suspicions and biases, I missed out on putting away those early career savings that could have supercharged my retirement decades down the road.

To make matters worse, the October 1987 crash occurred shortly after I became eligible to contribute to the 401(k). My first quarterly statement showed horrendous losses, though only on a percentage basis, since I had next to nothing in the account. Because of that trauma, as a 25-year-old who should have been at or close to 100% in stocks, I allocated my 401(k) very conservatively, putting the majority of the balance into a money-market fund.

Several years after working with Neil, I married Lisa. It started dawning on me that maybe, just maybe, Neil was not right about the 401(k) conspiracy. Now that I was married and planning to have children, the 401(k) took on more significance. It helped that by this time the company started providing a tiny match, 25% on the first 4% of salary contributed. I started saving a bit more in the 401(k), though sadly I was still overly conservative, probably keeping only about 40% in stocks.

I did do one small thing right, however. My company had an employee stock program for a few years. It would give each worker a tiny amount of stock every year. I think the company got some kind of tax write-off for doing so.

When the company ended the program around 1989, it gave employees a choice: take the stock as a lump sum or roll it into your 401(k) as company stock. My balance was $653, and I decided to roll it into my 401(k) and not take the tax hit. Fifteen or so years down the road, that tiny sum had, with dividends reinvested, ballooned to more than $15,000. More than anything else, seeing that growth helped me comprehend the stock market’s potential.

A few years ago, I did an internet search to see if I could find out anything about Neil. Sadly, I found his obituary. He had passed away at age 68. I read his life summary and found that he had been an avid boater, enjoyed flying model airplanes, and loved kidding with family and friends. I wonder how many times he told them he was “just planting seeds.”

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. His previous article was No Interest.

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