Ok, let’s set the scene shall we? You’ve just hit the 3 month or so mark at your new job and have now officially earned your spot in the cool kids 401k club. Awesome, right? You might look at yourself in the mirror that morning with a smirk on your face and a goofy thumbs up to congratulate yourself.
If you were anything like me though, you weren’t so sure what to think about this cool kids 401k retirement plan. So although I do wakeup most mornings with a weird smirk to myself in the mirror, I did not do this the day I went in for my 401k HR meeting.
Why Does it Seem so Frustrating?
These retirement plans were so over my head when I was younger, and I had a lot on my mind so I didn’t really try to learn about them. Then I saw Robert Kiyosaki speak live and although he didn’t bash the plan, he also didn’t wildly rave about it either.
So, if a self made millionaire didn’t advocate for it, and I wanted to emulate him, why would I be ok with getting into one myself? Don’t get me wrong, I think a 401k is a solid idea for people that are ok with working a 9-5 until the day they die, and then retire.
It also didn’t help that whenever I asked somebody about it, they All. Said. The. Same. Exact. Phrase… “It’s free money!” Yeah, ok Bob from marketing but like, on my 72k salary, I am putting in $120 a check and the company is matching $105, so I’m supposed to get suspiciously “kool-aid drinking” giddy about $200 free bucks a month that I can’t touch until I’m 59 1/2?
Honestly, it barely seemed worth it to me. I could just as easily invest my $240 a month contribution to an index fund or maybe cash inject into my whole life insurance account (if you’re into that sort of thing) and be done with it.
Here’s the Twist
I hope you’ve gotten this far because I am about to M. Night you, reader. I actually do have a 401k now with my current company. I finally made the jump! This is not to say that I have sipped on some sugary goodness by the way. I simply decided it would be ok to allocate a tiny bit of my portfolio each month to a 401k.
So, did a magic genie pop out of his/her lamp, look at my lack of a 401k and “made it so”? No, what changed my thinking of this type of plan was that I had heard a guest speaker on a podcast speak of it in a way I had never heard of before. I do not remember who the guest was, or exactly what podcast I had heard it from, but I will say that I have been listening to The Mad Fientist, and The Mile High Fi Podcasts.
Here’s what they had to say about 401k’s that changed my mindset
“If your 3% contribution is $100, and your company matches the 3%, $100 dollars, then you don’t have a 3% ROI, you actually have 100% ROI”
This is not an exact quote, but I will say it again. If you contribute 3% to the 401k and your company matches the 3%, you’re effectively doubling your money at 100% ROI.
That’s it folks! Instead of someone saying the same old lines of “It’s free money”, I finally heard it in a way that made me reconsider my abstinence. I still don’t think the 401k is the most magnificant vehicle to financial independence however, I do believe it can be a decent foundational piece.
I have been deeply motivated to journal my financial and fulfillment journey by Podcasters like The Mad Fientist, and The Mile High Fi Podcast. If you haven’t already, please check out their respective shows.
Time to catch FIRE