A Retirement Case Study

Have you heard about the 401k 1 percenters? People whose employers match dollar for dollar up to 18000?! It is hard for me to even imagine!

Then there are the top 50 percenters who have a 401k with a with a 3-6% match. This is where I am.

Hubs is neither of these.

He works for a small employer with a 401k plan and a sometimes match.

His company is small enough that it started its 401k plan within the last 5 years. Before that, they helped employees sign up for an IRA. The details of the old plan are unclear. I was only a girlfriend at the time and I didn’t have access to good stuff.

Every year since the plan started, my darling Hubs has a 401k meeting at work. His company requires attendance for all enrolled employees. Representatives from the 401k administrator come in and give a little pep talk about retirement. Sometimes the group pep talk comes with a 1-on-1 chat with the rep.

Last year, Hubs decided to meet with the rep. During the meeting, the rep expressed concern over whether Hubs was living today and not simply saving for tomorrow. At the time, Hubs was contributing 16% of his paycheck to his 401k. 16% should not shock a retirement guy. He’s since increased his contribution.

When I got word that he had his annual 401k meeting this week, the PF nerd in me got way too excited. I wanted numbers! I wanted to ask questions! I wanted to share it all with you fine folks.

Here are some observations based on my tiny retirement case study.

  • The company employs roughly 40 people between 2 locations.
  • Only 27 people or 67% of the employees are signed up for the 401k.
  • The 401k plan operates as an Opt-In program.
  • The 401k plan has a discretionary match. Sometimes it’s 0%, this year it’s 1%.
  • 1 out of the 27 people enrolled in the 401k plan logged into their account during the last year. That person logged on 46 times. That person was Hubs.
  • The average annual contribution for the 27 people was $2500.
  • The presentation included a mock portfolio to show how to navigate the website. The mock portfolio had an annual return of 20.21%.
  • Most of the people working for the company are over 40 years ago.

Three things stuck out to me.

First, 20% return is an irresponsible return projection. That may happen once or twice after a big down turn, but it is no where near reality in the long term. It is especially misleading after a year like 2015 when returns were essentially flat. Publishing a return of 20% implies that everyone else is investing it wrong. 20% encourages risky behavior. 20% needs to be stopped. *makes note to have Hubs challenge the projection next year*

Second, a 67% participation rate is a bad sign. 1/3 of the employees are turning their back on the plan, intentionally or unintentionally. Opt In programs require action and don’t attract plan participants. To fix the retirement crisis, it would go along way if 401k plans operated as Opt Out programs. My employer auto-enrolls new employees into the 401k plan with a 2% contribution. With an Opt Out program, at least then employees would have to make the conscious choice and take action to avoid the plan.

Finally, a $2500 average contribution isn’t going to get you anywhere, especially with a low or no match. Never mind the fact that Hubs is skewing the average high with his contributions. In addition, many of these employees are older. Most of them are in their 40s, many are in their 50s. These aren’t savers with time on their side. Saving $2500 every year for 10 years with a (realistic) 6% return only leaves $35,000 for retirement! Even saving $2500 for 20 years at 6% doesn’t get you over $100,000. It’s time to hope and pray for the mythical 20% returns. Over 20 years, $2500 at 20% gets you too $720,000 for retirement.


Based on this snapshot of a small employer in the midwest, the U.S. is going to be in a world of hurt in the upcoming years.

The retirement crisis is upon us.


I’m not adult enough.

So. . .

Let me tell you a bit about myself.

I’m 29 years old. I graduated from high school, college and law school. I’ve been married to Hubs for 3 years. I’ve been gainfully employed for 2 years.

I repair my own clothes. I (read: Hubs) do my own laundry. I read books for fun. I recycle, take public transportation and turn off the faucet when I brush my teeth.

I’ve been financially free from my parents for 5 years. I don’t have student loans anymore. My car is half paid for. I have great credit.

From reading that, you are probably thinking, “That sounds pretty adult to me.”

However, one thing is for sure.

I don’t feel ready to buy a house. 

I’m not adult enough for that.

I’ve been doing many things to set myself up for homeownership. I want to be ready. I certainly don’t want to be house poor. I’ve been saving for a down payment. I’ve been looking at houses, checking out neighborhoods and running the numbers.

I still don’t feel ready and I think I’ve figured out why.

My biggest struggle has been with setting the timeline for making such a big purchase. Never before have I made the decision about when something happens.

Let me share a few examples:

My parents started my education when I was 3. I stayed in school until I couldn’t go any further.

Destiny started my relationship with Hubs. He chose the day we got engaged. The venue decided what day we get married. My mom decided what year I got married! (Fun fact: With a few stern words, she pushed up the date by a full year!)

HR decided when I started my job (after I got it, of course). I still work there, so I haven’t made any decisions to leave.

I chose to buy my car, but I didn’t decide when. I bought it when my lease was up. That time was determined by the transition from lease to lease to lease back to my first car. I can’t remember if I chose when I got my driver’s license. Even if I did, I got my permit at 15 and didn’t get my license until I was 17. I never failed the test, I simply delayed taking it.

I haven’t made a major decision in my life about when something should happen. I wait for the world to decide for me.

But this doesn’t work with a house. No one is going to force me to buy one. I won’t suddenly find myself owning a home. I could rent forever. Some people do.

Never in my life have I been faced with such a life event where I decide when. I get to decide when! That’s a big step!

I am a creature of momentum. Put me in the stream and I’ll go where the current takes me. It’s time for me to get out the paddle and make my own route.

Defining my own timeframe is pretty intimidating.

I don’t feel adult enough for this. 

The Key to my Success After Debt

I’m nearing my one year anniversary of paying off my student loans. This time last year, I was in the final stretch! As I get closer to March 27, I’ve been reflecting on what I’ve done since then and what any of that means.

My biggest challenge has been that saving doesn’t ignite the same feelings that paying off debt does. The excitement of paying off debt builds with each payment as you get closer to zero. Saving starts at zero and builds until you decide to stop.

My transition from paying off debt to focusing on other financial goals has been a bit bumpy. Thankfully, I’ve been able to shift most of my money from debt to saving, without succumbing to lifestyle creep. However, the money has gone to several places. I had a tax bill eat up my initial momentum. I’m saving for a house, while  saving for retirement in my 401k and Roth IRA. I also paid for a vacation.

Unlike my loans, where I was single-minded, my saving has been many and varied. Not only do I have multiple targets, but I keep changing my strategy!

With all these different strategies, I attribute my continued success to one thing. I did this while I paid off debt, and I continue to do it with all of my savings adventures.

Pro Tip: Celebrate All The Milestones!

I believe I’ve been successful in my savings efforts because of the joy I give to each milestone.

The first step to celebrate milestones is to be aware of them. The single best way to be aware of any upcoming or current milestones is to track your net worth.

I started tracking my net worth right around the time my debt was dwindling. I was paying off roughly $2500 per month in debt, and I wanted to keep that pace. I set up my net worth to track where my money was going and where I wanted it to go. For example, I track my retirement savings and my house fund. I want my money to go there.

My monthly net worth snapshot shows where my money is. Each line item comes with its own milestones. I have so many balances to get excited about!

By tracking my net worth, I’m able to see the moment when I cross another hurdle. For my growing balances, I rejoice every $5000 gain. For my declining car loan balance, I give a little Hallelujah every $1000. I actively give a little woot woot to the following balances.

  • 401k
  • IRA
  • Total Retirement Savings
  • House Fund
  • Total Net Worth
  • Car Loan  

With all these categories, it seems like I have a new shiny achievement every month.

In January, I had a WHOLE $10,000 in my 401k. Can you believe it?? I’ve only been saving in earnest for less than a year and I already have $10,000. That’s with the current declining stock market environment!

In February, I passed $20,000 saved in the House Fund! That’s $20k saved in less than a year!

Also in February, I’ll have less than $8000 left on my car loan! It feels like I just took out the loan and I’m almost halfway through the 3-year term!

In the next month or two, I’ll have over $30k saved for retirement. I’m not even 30 and I’ll have 30k saved. Woot!

Depending on my other balances, I may already have a $65k net worth. I’m knocking on $70k’s door!

Without tracking my net worth (publicly or privately) I would miss all of these little motivators. These are all gold stars that I’m on the right track. These are all little whispers telling me that I’m doing the right thing.

I don’t expect to get excited about every $5k for too much longer. Soon the market will swing my portfolio by that amount. That is why it is important to celebrate all the milestones while they are small. I argue that the slower your progress, the more important it is to celebrate even the smallest achievements.  The more work it takes to get there, the more you deserve a confetti horn emoji.

I hope I’ve convinced you to celebrate your own achievements. It’s pretty amazing what can happen when you pay attention to your money.

Have you celebrated your progress lately? Share and I’ll cheer for you!