What answering 10,000 calls in a 401(k) call center taught me about money

My first job out of college was answering phone calls in Vanguard's 401(k) call center.

Being the person at the end of an 800-number is just as glamorous as you think.

While this was an entry-level job, it challenged me as much as some of the more senior roles I held later in my career.

Here are the lessons that stayed with me fifteen years later.

1. People do not learn how to invest. 
The average person doesn't know how a mutual fund works or how much they need to save for a comfortable retirement. Why would they? These aren't lessons that are taught in school or at work (unless you work for an investment company like I did). We expect workers to choose a savings rate and investment options with minimal education about how those choices will impact their lives from each pay period to the next 30+ years of their lives. 

2. Employers are well-intentioned but still missing the mark.
To ease the burden on employees and simplify saving for retirement, many employers choose to automatically enroll employees in retirement plans. This has hugely increased participation rates in these plans, which is a win! What isn't a win is what happens when an employer chooses a savings rate that's too low. Employees, understandably, assume that the percentage their company chooses is appropriate for their goals. If someone is enrolled at 3% or even 6% of their paycheck, they likely won't have enough to comfortably retire when they want to unless they proactively increase their savings rate down the road.

3. Short-term budgeting and long-term goals are incredibly connected.
Many of the phone calls I fielded in this job were from people trying to gain access to the money in their retirement accounts well before retirement when they were hit with a big expense or needed to buy Christmas gifts. Most employer-sponsored retirement plans restrict access to preserve the money for its intended purpose. Even if a plan has more flexible provisions, most withdrawals from these accounts are levied with a 10% penalty for people under age 59.5. Something as simple as an emergency fund with a few thousand dollars could prevent the need to tap a resource that is designed to keep your money protected from you (for the benefit of future you!) Preparation in the near-term makes achieving longer-term goals much easier.

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Here are some general guidelines for making the most of your retirement plan. Save between 12-15% of your income (you can include employer contributions when you're calculating your savings rate) and invest in low-cost, diversified funds that are appropriate for both your retirement timeline as well as how much investment risk you feel comfortable taking. 

If you're not sure that you're on track to meet your retirement goals, need some help defining those goals more clearly, or evaluating the options available to you in your plan, I'd love to help you do a check in on your retirement readiness and share a plan for how you can close any gaps you might have.

Let's chat - it's free