The Little $500,000 Mistake Made by Many 401k Participants

The Little $500,000 Mistake Made by Many 401k Participants. How is it that so many 401k Plan Participants can unknowingly make a mistake that costs them so much in their 401k Plan?  Plan Administrator, Ms. Annie Foley discusses that very issue with Mr. Fred Barstein, Founder, and CEO of The Plan Sponsor University (TPSU) during a recent TPSU Fiduciary Education Program held at the University of Denver in Denver, Colorado.  There are approximately 100 employees at her organization which concentrate on architectural global design firm.

Full Transcript Here

Fred Barstein:               Fred Barstein with 401k TV here at the University of Denver where we just completed a great TPSU program. And I am here with Annie, who I called Andy, sorry.

Annie Foley:                 That’s okay.

Fred Barstein:               Welcome Annie.

Annie Foley:                 Thank you very much.

Fred Barstein:               Okay if we ask you a few questions?

Annie Foley:                 Absolutely.

Fred Barstein:               Okay.

Fred Barstein:               Before we do tell us a little bit about yourself and your organization.

Annie Foley:                 My name is Annie Foley, I work for Fentress Architects. We are an architecture firm here that has about 100 employees.

Fred Barstein:               100 employees. So one of the things you talked about in the beginning and you said I want to learn about this, which I thought was fascinating. The whole phenomenon at home, you said, moms, but parents and they are not working or they are working but tell us a little bit about that issue. And you say it’s your peer group.

Annie Foley:                 It is my peer group. It is parents who find themselves deciding to exit the workforce to take care of kids.

Fred Barstein:               Right.

Annie Foley:                 Usually because they just can’t afford childcare. They would prefer to be working for pay inside the workforce but for whatever reason decide to stay home and take care of the children.

Fred Barstein:               Sure.

Annie Foley:                 I heard a statistic that for someone who leaves the workforce for a minimum of two years that they could miss out on $500,000 overall lifetime earning potential.

Fred Barstein:               Right.

Annie Foley:                 Which doesn’t take into account necessarily all of the retirement possibility but over the lifetime of their employment if they had stayed employed that’s how much more they would have had. And I know from my peers that I’ve spoken to they’ve never heard that statistic and it made them think. And then also consider what is the working spouse or partner doing to hopefully account for that missing retirement portion? And I don’t think a lot of people are thinking, either thinking about it or knowing how to attack it.

Fred Barstein:               And even some people that might be working from home they might not be full time or they might be contractors and that kind of thing.

Annie Foley:                 Just might not have a retirement vehicle available to them, possibly.

Fred Barstein:               Final question for you. Couple of things that you might have picked up today that you might want to take back?

Annie Foley:                 Main thing I would say that we have a good base program that we’re doing for our retirements. But we can do better. What I want to invest in is taking the 50% of 6% and moving it to the stretch so that we can at not much more cost to the company be able to encourage better saving behavior in our employees.

Fred Barstein:               Great. Very good. Well, thanks for your time today.

Annie Foley:                 Thanks.

Fred Barstein:               And thank you for watching 401k TV.

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