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I BEGAN MY CAREER as a part-time employee for an engineering consulting firm. At the time, I was working on my master’s degree in mechanical engineering. I shifted to full-time when I’d wrapped up my coursework but before completing my research and oral defense.
Over the next four years, I finished that degree and passed the national exam to become a registered professional engineer. I also got married, and bought a dog, a second car and a house. In other words, I jumped straight into middle class life.
I was the company’s seventh employee. The firm grew and I progressed. When I turned age 30, I opened IRAs for both me and my wife, thinking we’d never work for companies that provided pensions. An acquaintance recommended I choose Vanguard Group’s S&P 500-index fund (symbol: VFIAX) and Windsor Fund (VWNDX). At the time, an individual’s annual IRA contribution was limited to $2,000. In the early 1980s, my employer introduced a 401(k) plan and I immediately joined. The plan was administered by a bank and the fund offerings were less than stellar, but it allowed me to contribute more than $2,000 a year.
Meanwhile, after some years of success, the company started to struggle. A slowdown in our core business led to shrinking paychecks for principals like me, so I ceased contributions to the 401(k). Everyone else did, too. I found out the company hadn’t made all the plan contributions for months, even though the money had been withheld from our paychecks. We later learned that the same was true for state and federal tax withholding.
The chief financial officer monitored the mail for checks every day. One day, he received a check large enough to cover all missed contributions to the 401(k). When he returned from the bank, he turned in his resignation, cleared out his desk and left. He later told me he felt obligated to make sure the 401(k) plan was whole before he quit. What about the unpaid tax contributions? He said those were the owner’s fault. The company eventually folded, and I rolled my 401(k) balance into my Vanguard IRA. It was an empty feeling to have devoted 14 years to the company, only to see it fail so terribly.
When I was at the firm, my largest client was a local power company. It offered me a job almost as soon as I was available. This was a large company that offered a 401(k) and a pension plan. After a year with a regular engineering group associated with plant repairs and upgrades, I was assigned to a problem-solving group with higher visibility and more responsibility. I enjoyed the work, but the administrative and bureaucratic requirements were tiresome. I made regular contributions to the 401(k) and received matching contributions in the form of company stock. The 401(k) match vested after five years.
But the board of directors brought in a new, aggressive CEO who promptly announced layoffs—which included me. A “transition benefit” was immediate vesting of 401(k) matches. The financial markets approved of the new CEO, so the company’s stock was performing well, and my four years’ worth of matching contributions tripled in value. As soon as I was laid-off, I liquidated the 401(k) and rolled the proceeds into my Vanguard IRA.
My next employer was a small technology company developing a filtration process for extracting particulate matter from hazardous waste streams. This was an exciting time. The patent had just been awarded and the founders were assembling a prototype for testing. I authored several Small Business Innovation Research (SBIR) proposals that were ultimately funded by U.S. government agencies.
I stayed there four years, contributing part of my earnings to a SEP-IRA. During the final year and a half, it became clear that the filtration test results weren’t as good as expected. Company income, totally dependent on SBIR contracts, was falling. So were our paychecks. I left when it became obvious that the technology had no future. Again, I rolled my retirement money into my Vanguard IRA.
I quickly landed a new job as an engineer for a small software company. The software product was an engineering program that helped with design improvements. It was extremely popular with some engineering companies. The company had a Fidelity Investments’ 401(k) with a 4% match, along with a great selection of funds to choose from. I always contributed more than enough to obtain the company match, and typically increased my contribution rate by a percent each year.
The CEO who hired me was let go after I’d been there a year, but a new CEO was hired, one who had strong industry contacts that promised to translate into higher sales. A few years later, my wife left me. While she’d contributed to her IRA for the prior two decades, my combined IRA plus 401(k) balance exceeded hers, so I was required to transfer some of my retirement savings to her via a QDRO, or qualified domestic relations order. Our other investment and savings accounts were also affected.
The separation and divorce negotiations were difficult. Once it was all over, my finances were a bit of a wreck and my retirement savings had taken a hit. Around the same time, my employer was acquired by a large software company, and we were brought in as a division of the larger firm. This is when some magic happened for me. Over the course of three years, my pay increased substantially. I started maxing out my Fidelity 401(k) and refilling my emergency fund. My Vanguard IRA balance also continued to grow.
Meanwhile, a modest inheritance from my parents became part of my investment account. I left that money to grow, and haven’t yet needed those funds. Other than the divorce settlement QDRO, I never took any money out of my IRA or 401(k) during my career. In mid-2020, just after turning age 67 and after working 20 years in the engineering software business, I pulled the plug and retired. I rolled my Fidelity 401(k) into my IRA.
I didn’t take Social Security until last summer, when I turned 70. While I waited to claim benefits, I spent from accumulated cash and took monthly draws from my IRA. Now that I’m receiving Social Security, I continue to make regular withdrawals from my IRA, with an eye to lessening the tax hit when I have to begin required minimum distributions in a few years.
There are many potential pitfalls with IRAs and 401(k)s. I know multiple coworkers from my first job who spent their 401(k) proceeds, rather than rolling them over. I had a friend from the software company who borrowed from his 401(k), but then had trouble repaying the loan when he left the company. But these retirement accounts worked well for me. By contributing regularly over many decades and rolling over my retirement balances to my IRA whenever I changed jobs, I feel like I’m the poster child for how to make the most of tax-deferred accounts.
Jeff Bond moved to Raleigh in 1971 to attend North Carolina State University and never left. He retired in 2020 after 43 years in various engineering roles. Jeff’s the proud father of two sons and, in 2013, expanded his family with a new wife and two stepdaughters. Today, he’s “Grandpa” three times over. In retirement, Jeff works on home projects, volunteers, reads, gardens, and rides his bike or goes to the gym almost every day. Check out his previous articles.
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Great story, Jeff! Your example perfectly illustrates the benefits of consistent contributions to a tax deferred retirement plan. And for the future well being of our nation‘s citizens, it’s a great thing that more organizations now take an “opt out” rather than “opt in” default approach.
It’s nice to read a piece from a fellow Wolfpacker-I was right behind you as I attended from 75-78. I’m jealous you were there for the David Thompson era!
Wow! Another Wolfpacker on Humble Dollar! I even attended the freshman games when David Thompson and Monte Towe played.
I attended a presentation last weekend by Chancellor Randy Woodson that addressed NC State’s involvement in the local community.
Thanks for reading and commenting. I also liked to hear about the automatic enrollment process for 401(k) programs.
My career had similar changes and pivots. My first year working I was anxious to contribute to the brand new IRA, and my maximum was $600. Then the lid was raised to $2,000, and I stepped up my contributions. I’ve used 401K, SEP-IRA, Solo 401K, and Roth IRA, in addition to traditional IRA. I am so grateful these savings programs were available because it made my retirement possible.
Laura – thanks for reading and commenting. It sounds like your retirement savings habits were similar to mine. Good luck with all your travels.
Jeff…
As I read your article I was thinking, “Damn…glad I wasn’t an engineer.” Ha!
I am a NC native and I came home to retire, after living in 9 different states, over my three career working lifetime.
Like you, I was an early adopter of IRA, 401k/403b and savings. While I never lost any of my 401k money to divorce, (50th anniversary is June 23rd,) I did foolishly liquidate a 401k, instead of rolling it over, very early in my career, when I changed employers.
I don’t remember exactly what I spent the money on and it wouldn’t have been more than $10,000…BUT…I don’t even want to think about what that $10,000 would have grown to from May 1983 until January 2024, when I retired.
According to my HP 10b II+…$10,000 PV…41 N…10% I/YR…FV equals $497,851.81
IF ONLY……
Great Article. Thanks for sharing your story!
Kevin – Thanks for reading and the comments. Yes, it’s almost scary what the present value of a 30- or 40-year-old investment of $5,000-$10,000 might be worth today.
When the consulting company folded there were several (maybe many) folks who, like you, just took the cash out of their 401(k) and spent it.
FYI – I have an app on my iPhone that pretty much duplicates the look and feel of the HP 11C engineering calculator. 🙂
Thanks for your story. We all have different paths and I love to read about them
Nick – thanks for reading and commenting!
Your story brought to mind the word resilience! Good job!
Mr. Schneider – Thanks. I appreciate the compliment.
an interesting journey. When i managed 401k plans i heard similar stories all the time. There aren’t really pitfalls with 401k plans, but more caused by the people who use – or misuse them.
If you don’t mind me asking, but what were the fees associated with the plans you put together? I have reviewed plans from smaller smaller companies and the fees are rather high and not very good fund selections.
It was years ago, I don’t remember except it was two large plans with same investment and we tried for lowest fees possible. There were seven funds, three pre mixed portfolio – conservative, moderate and aggressive to choose and later we added target date funds.
Mr. Quinn – thanks for commenting. If you managed 401(k) plans, then I imagine you got quite an earful of comments from folks who really didn’t understand how they worked. I was one of two in my office who people would come to with questions about how the program worked and what their statements meant. Sometimes it was hard to not ask them about the decision process on some of their mutual fund choices.
Yes indeed, twenty years of it. I felt sorry for many who made decision that cost them plenty, especially the ones who decided not to participate.
Nice article Jeff. You showed that engineering careers can be rewarding but volatile. You need to be flexible and adaptive as things change. I feel fortunate I was able to stay employed and grow my career despite 3 mergers, a sale, and then 7 years of private equity driven excitement!
Did the pension at the power company have a 5 year vesting period? Our pension required 5 years of service, but our 401 K matches vested immediately. My wife and I did similar 401k to IRA consolidations to our VG IRAs. They have worked out very well for us.
Rick – thanks for reading and the comment/question. Sounds like you had some stress in your working career, too. To answer your question – when the layoff hit I had not yet vested in the pension plan. That company (Carolina Power & Light) was later swallowed up by Duke Power, which has continued to grow by acquisition. I wonder if the pension plan still exists.
Wow, what a story! I agree, you are a 401k success story. Good for you. I continue to bang the drum that the 401k is the vehicle for retirement success and wealth-building in this country. Some don’t agree with me, but your story seems to support that idea. Kudos.
Ben – thanks for reading and the comment. The 401(k) is “a” way to go, but not the only way to go. It worked for me. Unfortunately not everyone is offered the opportunity.
Jeff I could feel the stress at each transition point of your career. But the important point is you survived and provided a valuable lesson on putting money away for retirement. Thanks for a great post.
Mr. Shopper – thanks for reading and commenting. Yes, there was a lot of stress associated with the end of my tenures with the consulting company, power company, and R&D firm. I was fortunate to put that all behind me when I went to work for the engineering software company.
Nice article, and great job taking advantage of the retirement accounts available to you. How did your coworkers from your first company fare over the ensuing years after the failure?
Edmund – Thanks for reading and commenting. I still maintain contact with a few people from that time, but the end came almost 35 years ago, and I’ve not heard from most of them in a long time. In the first few years after the business closure, we all in general found new jobs and continued with our lives. Some achieved great success in their new careers – probably more than if the company had survived. Several former coworkers have unfortunately passed away.