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I braved the cold and windy weather last night for a walk, heading back to my vacation home. I was magically drawn into the local hotel by the thought of a crackling turf fire and a nice pint of Guinness to warm my wind-chilled bones. It was an excellent choice. I got to listen in on a conversation a group of twenty-somethings were having at the cubby beside mine.
I enjoy eavesdropping but normally don’t get the chance. My wife, Suzie, expects me to concentrate on our conversation. Being on my own this evening, I was all ears when I caught one of the guys explaining he’d worked a deal with his new employer for higher pay rather than a contribution to his retirement account. I didn’t even realise this was possible, but being a former employer myself, I could imagine a few ways to do it. It would certainly be beneficial for a questionable employer.
The couple benefiting from the extra cash were explaining what they planned for the windfall—a two week Eastern Mediterranean cruise this coming summer. The itinerary sounded great. Very nice, I thought to myself. The other couple were expressing the wish that their respective employers would do the same but knew it wasn’t a possibility. I was very grateful to hear that. I nearly expressed this opinion but caught myself.
The young couples finished up and headed into the night while I ruminated on the conversation, sitting alone sipping my pint. I can see the appeal—extra cash is always welcome, particularly when you’re young. But I couldn’t help thinking of the downsides. Even if I discard the ethical questions about the employer, the thinking doesn’t seem that joined up to me. Missing out on the employer contribution, plus the fact that in the UK for every $100 pension contribution the government adds a further $25 or $40 depending on your tax rate… it’s certainly going to be a more expensive cruise than they ever dreamed of.
I gathered myself to leave. Glancing at the booth where my young couples had been sitting, I thought through the cost of the cruise. If I take the employer match and the tax contribution from the UK tax authorities and extend it over maybe thirty years, I wouldn’t be surprised if it’s at least $50,000 per person. Let’s hope it’s a splendidly wonderful adventure for them.
Having opted out the problem is likely to be inertia on ever getting back in to pension saving.
Obviously from this end of the journey it’s easy to condemn such folly but we were all young once and I suspect few of us financially optimised our lives (what’s having kids about if we wanted to do that?). That’s really the time when a stern warning from a trusted older friend (or interfering busybody – the line is fine) could have most value. That’s why I think you do need an attention grabber for younger folk and FIRE ideas are ideal for that because they can make sacrifice today more tangible.
My first thought after hearing those remarks; beam me up Scotty, there’s no intelligent life on this planet.
Dan you just never know what you’re going to hear in a bar.
LOL, don’t I know that? Here’s an old article of mine that might make you smile:
https://humbledollar.com/2024/05/studying-for-the-bar/
Mark, thank you for the article and the intro to “turf fire”. I guessed it was peat logs and a quick review of an article confirmed it. Very interesting – cutting tools, harvesting, drying – heavy stuff and all hard work. Really need to get on with an extended stay on the Emerald Isle. Got in my, “learn at least one new thing each day” to-do item early today!
Slán agus beannacht.
https://www.irishamericanmom.com/what-is-irish-turf/
Go raibh do chuid foghlama gan stad gan staonadh!
I started work for a large local govt in NC when I was 33 years old. They took 6% out of my paycheck for our retirement pension, and my employer matched it with 4.5%. Thankfully, I had no choice in the matter, but if I had, I would have done what the young UK guy did. Take the money.
Looking back at that, it would have been very foolish for me to bypass the pension. I now enjoy a good pension that makes for a comfortable and secure retirement.
Our perspective changes as we get older. Unfortunately, failing to save when we are young can have a huge negative impact on our retirement.
My first employer didn’t even offer a pension. I had to actively join a UK product similar to your traditional IRA
Ignorance is bliss Mark. Maybe it works out in the end and they have enough time to recoup. In the meantime does the older wiser me invest more heavily in cruise shipnstocks knowing that this will likely continue to happen? And cruise.stocks can be replaced by any of the wants that the younger uninformed might spend on.