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Planting Bad Seeds

Ken Cutler

WHEN I WAS A YOUNG engineer, I supervised a charismatic worker named Neil, who was a sort of pied piper to the younger engineers and technicians in our group. He was about 20 years older than us and loved to dispense advice like a guru.

His quirky advice usually had a financial component. For example, he recommended that we single guys marry women with curly hair, as that would save tens of thousands of dollars over the course of the marriage, thanks to fewer trips to the beauty parlor. He even had a calculation he’d use to support his theory. He also told us about his scheme to help expand his wife’s cleaning business, which in turn would allow him to ramp down the time he spent working, an activity he seemed to have an aversion to.

“Just planting seeds,” he liked to say after sharing his latest idea.

Another idea he regularly tried to plant: The 401(k) was one of the biggest scams ever foisted on the public by the government. The basis for his argument seemed to be looming legislation that would somehow means-test Social Security, thereby reducing or eliminating payments to those who had their own means, such as money in 401(k)s. “You’re just funding your own Social Security,” he would tell us young guys.

This was well before the internet was available as a fact-checking resource, and Neil spoke confidently, indicating he had really looked into these things. Unlike his chauvinistic views on marriage, which we discounted, some of us had an uneasy feeling he might be on to something with his 401(k) argument.

The company made new employees wait two years before they could participate in the 401(k) plan, and it didn’t provide any matching contribution. Needless to say, many of us young employees weren’t very enthusiastic about availing ourselves of this benefit. For years, I put in 2.5% of my salary, reasoning that I could at least spare an hour of pay each week, on the off chance that Neil turned out to be wrong.

Today, we’re constantly reminded of the importance of saving early to take advantage of the “magical power of compound interest over time.” Front-loading your 401(k) is so much more effective than ramping up your contributions at the end of your career. But because of the seeds that Neil had planted, coupled with my own suspicions and biases, I missed out on putting away those early career savings that could have supercharged my retirement decades down the road.

To make matters worse, the October 1987 crash occurred shortly after I became eligible to contribute to the 401(k). My first quarterly statement showed horrendous losses, though only on a percentage basis, since I had next to nothing in the account. Because of that trauma, as a 25-year-old who should have been at or close to 100% in stocks, I allocated my 401(k) very conservatively, putting the majority of the balance into a money-market fund.

Several years after working with Neil, I married Lisa. It started dawning on me that maybe, just maybe, Neil was not right about the 401(k) conspiracy. Now that I was married and planning to have children, the 401(k) took on more significance. It helped that by this time the company started providing a tiny match, 25% on the first 4% of salary contributed. I started saving a bit more in the 401(k), though sadly I was still overly conservative, probably keeping only about 40% in stocks.

I did do one small thing right, however. My company had an employee stock program for a few years. It would give each worker a tiny amount of stock every year. I think the company got some kind of tax write-off for doing so.

When the company ended the program around 1989, it gave employees a choice: take the stock as a lump sum or roll it into your 401(k) as company stock. My balance was $653, and I decided to roll it into my 401(k) and not take the tax hit. Fifteen or so years down the road, that tiny sum had, with dividends reinvested, ballooned to more than $15,000. More than anything else, seeing that growth helped me comprehend the stock market’s potential.

A few years ago, I did an internet search to see if I could find out anything about Neil. Sadly, I found his obituary. He had passed away at age 68. I read his life summary and found that he had been an avid boater, enjoyed flying model airplanes, and loved kidding with family and friends. I wonder how many times he told them he was “just planting seeds.”

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. His previous article was No Interest.

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Cammer Michael
1 year ago

In 1985 my dad gave me a few shares of AT&T, IBM, and a few others I don’t recall. Five years later, I didn’t see the point; the market hadn’t moved. And Merill Lynch wanted me to pay over $100 to buy or sell more stock. My firsthand experience was that the market didn’t work.
Wasn’t until 1993 that I started reading about finance and soon after other brokerage firms dropped their fees.

Linus Avila
1 year ago

Some more examples. That “entrepreneurial” cousin, your barber, the Uber driver taking you from SFO down to Silicon Valley who knows Vinod Khosla, and the so-very-bright Ivy League grad who spins a beautiful story so you willingly part with 1.125% of your net assets every year in “fees”!

Jack Hannam
1 year ago

As a teenager, I remember “sage advice” from certain coworkers that working overtime wasn’t worth it, because “all the extra pay would go to the government”. I knew next to nothing about business, taxation or wealth, yet it seemed obviously wrong, otherwise why would others pursue jobs paying much more?

I gradually learned not to mistake confidence with competence on the part of the person dispensing advice. It is curious how many people take seriously, let alone give more credence to, opinions or advice offered by a familiar person who is not an expert than an unknown expert. Michael Shermer’s “Conspiracy: Why the Rational Believe the Irrational” and Tom Nichols’ “The Death of Expertise” are informative. Daniel Kahneman’s “Thinking Fast and Slow” is my favorite book written for the general reader discussing how we make decisions.

I think benefits managers, like now-retired but still engaged Dick Quinn, must find it frustrating when employees hear inaccurate contradictory advice to what they recommend. I assume companies use informational brochures in their attempt to educate the employees on the basics. I have read vignettes intended to illustrate these concepts. I have a suggestion: Construct a vignette contrasting the long term results obtained by an investor who followed suggested guidelines, with one who preferred to follow what “Neil” suggested. Perhaps that might shed some light for those so inclined to take “Neil” seriously.

Jerry Granderson
1 year ago
Reply to  Jack Hannam

I totally agree with the importance of learning “not to mistake confidence with competence on the part of the person dispensing advice.

Andrew Forsythe
1 year ago

Ken, thanks for your story. I share your regret of not saving more and investing more when I was starting my career so as to capture that magical compounding. As Rod Stewart would say, “I wish that I knew what I know now….when I was younger”, although he might not have been refering to compound interest.

wtfwjtd
1 year ago

It sounds like Neil not only loved kidding family and friends–he also loved kidding himself. At least in the case of his 401k, he wasn’t able to stick around long enough to realize that the joke was on him. But that’s not likely to be the case for many of those he “advised”, and hopefully, like you, they’ve intentionally made a more flexible plan for themselves. Thanks for the interesting read.

Last edited 1 year ago by wtfwjtd
R Quinn
1 year ago

Your story reminds me of many similar when I was working. Every office, division, even work crew had it own expert advising others on all things related to the company.

Much of the advice was centered around our 401k. I remember one guy who spread the word not to participate in the 401k (with a match) because the Company would use your money.

We made major benefit changes in 1996 for new hires from that point on. In 2023, there are still people on Facebook groups for my old company telling people all about those changes 30 years ago, why, how, and about all the benefits lost etc.

I am the person who conceived of the change, designed it and negotiated the program and yet the local experts spew their wisdom and people dismiss my comments explaining the truth.

I think there are many Neil’s still out their giving advice still followed by many.

Fred Beck
1 year ago
Reply to  R Quinn

That type of misinformation likely helps explain a lot of those disturbing retirement savings statistics. It’s sad to think how many folks had the capacity to save but made the choice not to, and often because of this type of “advice”.

A lot of people in this world love giving people their unsolicited opinion. But it’s a tragedy when those uninformed comments have this type of devastating long term consequence.

wtfwjtd
1 year ago
Reply to  R Quinn

That reminds me of a story by Larry the Cable Guy. He said he once entered a “Larry the Cable Guy Sound-a-like Contest” and got *third* place! No kidding! The judges told him he was pretty good, but “don’t quit your day job.” Talk about no respect!

Nuke Ken
1 year ago
Reply to  R Quinn

Thanks Dick. I can just imagine how frustrating it must be for you to engage on those Facebook groups. When 401(k)s were relatively new, I think there was a lot of bad information being passed around, similar to what you heard about the company using your money.

OldITGuy
1 year ago

Thanks for sharing your story. It’s a useful cautionary tale to remind us to view such doomsday prophesies with a skeptical ear. When I was in the miliary back in the 1970’s there was a persistent rumor that military pensions would be phased out. Of course, that never happened. More recently, I persistently hear people saying things questioning the long term viability of social security. I don’t know how many people have made bad decisions based on such baseless speculations, but I know you’re not alone. Again, thanks for sharing your cautionary tale since these days the flood of baseless “information” is mind numbing. It’s a good reminder of the costs if we fail to have a skeptical, questioning eye before we accept something as “fact”.

Nuke Ken
1 year ago
Reply to  OldITGuy

Thanks for your comments, Guy. Back in the day we did not have the internet available to research the bases for claims such as Neil had. Now the problem is figuring out how to filter through the huge mass of legitimate, bogus, and contradictory information instantly at our disposal.

OldITGuy
1 year ago
Reply to  Nuke Ken

Yep, so true.

Nate Allen
1 year ago

But the real question: Does Lisa have curly hair?

Nuke Ken
1 year ago
Reply to  Nate Allen

Nate, thanks for giving me a belly laugh on a Monday morning. No, Lisa does not have curly hair…and that was the farthest thing from my mind when I asked her to marry me.

wtfwjtd
1 year ago
Reply to  Nuke Ken

Well, dang. If only the nonsense Neil put out about a 401(k) had *also* been the farthest thing from your mind when your company made one available, you (and Lisa!) would have both been a lot further ahead 🙂 Oh well.

Last edited 1 year ago by wtfwjtd

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