Monday, March 1, 2010


When I was in my early twenties, I got my dream job at a small nonprofit, and I stayed there for 14 years. My dream job, that is, except that the pay was kind of low and there was no retirement fund. We weren't always sure the jobs would be funded year to year--some of the funding came from grants. There were, however, generous vacation, sick time, and health insurance benefits. The job was extremely interesting. And who needs a retirement fund in your twenties? In general, the people I worked with didn't seem to need that. We were (for the most part) young, and when several years later the organization ended up setting up retirement funds where the organization would match up to 2% of our salary, we thought we had hit the jackpot. Most of us contributed 2% of our own money. I looked at that fund the other day. It recently crossed the $10,000 mark, which I thought was funny (in an ironic way--as in, who could live on that?). And then I looked at this fact from Harper's Index (January 2010).
Percentage of all US 401(k) accounts that are worth less than $10,000: 46%.

And now, I work in a big organization. Big enough to offer retirement, vesting, matching funds, etc. And one thing that I have found is that there are a lot of people in this organization who started working there in their twenties and thirties. They are vested now. They chose to work there, because they craved stability. They knew they wanted the retirement fund (even in their twenties).

And look--you can be a nurse, or an accountant, or a computer programmer, in a lot of settings--public sector, private sector; private entrepreneurial start-up, medium-sized office, large public setting. Some people will choose that larger, public setting because of the stability and benefits it offers. In trade, they might give something up... a more interesting job... more money... or frequent changes of organization (because if you stay until you "vest," you are going to want to stay a while longer as well).  Do you know anyone whose parents encouraged them to go work for the post office, the government, the schools?
Would you prefer a $50,000 salary now and no (or very limited) retirement benefits, or a $40,000 annual salary now, with retirement benefits? I look around my organization now, and I see a lot of people who chose the latter.

Most school employees fall into that second category. They're consciously choosing stability over the risks of starting a small business. And when they were looking for a job, or considering careers, they probably skipped over the ad for the small nonprofit. When they chose their jobs, they were, in fact, considering a wage and benefits package that included retirement benefits. They are not separate from the decision. They are a part of the decision.
If and when retirement benefits cease to be part of the package for teachers, custodians, or anyone else (see the interesting comments and discussion in this post) then we might see some changes in the makeup of the employees. And generally, what that means is that the "best and brightest" will leave, because they have more options and/or more go-get-'em. That, in my opinion, will not benefit the schools. Retirement benefits may be dragging schools down financially, but have you considered that they also might be dragging schools up in quality?

Not everyone can live on a 401(k) worth $10,000, and some people know that--even in their twenties.

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