Fear & Math: A Practical Application

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It’s time to rethink finances.

Boeing employees turned down $98 million in 401K employer match contributions by choosing not to contribute to their own retirement. Why would anyone do this? They most likely were too afraid of not having enough money to live on and didn’t do the math.

A wealth education would teach workers to evaluate their options and figure out how to at least get a bigger piece of the pie. 401K contributions are made before tax is calculated on someone’s paycheck; if that money is instead paid to the employee, the employee pays tax on it. But money in a 401K feels inaccessible, or not even real, and withholding on a paycheck feels very real and therefore feels like something is being taken away, like taking a loss.


Stop right there.


It’s likely the feelings have gotten in the way of clear thinking, the fear of not having enough money is too strong for logic. 401K money can be accessible when necessary through a hardship withdrawal if the money were needed to help meet living expenses. There would likely be taxes due and a possible 10% penalty upon withdrawal, but it may be possible that an employee taking advantage of an employer match program would end up in a much better financial position even when taking a hardship withdrawal.


401K contributions are taken from a paycheck before taxes are assessed, and the other withholdings are calculated on what’s left over meaning the employee pays less in taxes overall. When a participant withdraws their original contribution amount it’s important to remember the taxes he or she didn’t pay on that income. If the participant pays a 20% income tax rate, the 10% penalty is still less than paying the income tax. Because their employer has matched their contribution, it’s possible for the participant to withdraw their contribution amount and still have some retirement savings remaining despite penalties and taxes.

There is no cash flow excuse for not taking advantage of what employers are offering. It’s possible to hold out for a higher wage, but the benefits left on the table likely amount to trillions in wealth that has been given to those who put themselves in the position to receive it. You want to be rich? Then put your hand out and wrap it around the package of gifts.

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