Your 401 (k) Is Making a Statement

Asked about his legacy, Benna points out that another huge demographic shift is taking place. People who are 65 seem younger than they used to. A hundred years from now, the 401(k) may be irrelevant, he says. "Who knows if people will even retire a hundred years from now?"

Benna has his retirement savings in mutual funds. He says that "anyone who is managing their own retirement by picking stocks is a fool."

His view of how to arrive at a comfortable retirement can be contained in a sentence, as bracing as a crisp breeze: "You have to do the calculations." You have to face reality: When are you going to retire? What income do you need? What are you putting aside now, and how are you investing it? "You're on a journey: You're not going to arrive where you want by accident."

And the 401(k) is nothing more than a tool, totally in your control. If it doesn't work out, you can't blame the 401(k), any more than you can blame your checkbook for bouncing a check.

"The people who are most enthused about 401(k)s," says Benna, "have a plan. They know what they're doing and why they are doing it. The people who complain the loudest are ignorant."

And of course, the first step toward knowing what you're doing is . . . opening your statement.

Sidebar: What's Fast

5 Questions About 401(k)s
People who live and work in the world of the 401(k) love to study their world. Fidelity Investments, for instance, this year issued a report on the impact of company stock in 401(k) accounts. It is 52 pages long, with 66 separate data tables. The result of this propensity to study the 401(k) is a library of data, information, and trivia. Here, then, are answers to five basic questions about the 401(k) economy.

1. Given the market's performance, how's the national 401(k) account doing? Not too badly, in fact. The Dow is down 27% since the end of 1999. At that point, total assets in 401(k) accounts were $1.82 trillion, according to Cerulli Associates. A year later, the national 401(k) held 1.74 trillion -- down just $80 billion from the year before. And at the end of last year, the total was $1.64 trillion. So from its 1999 peak, the national 401(k) has drifted down 10% -- not terribly bad, even considering that market losses were offset by employee and employer contributions.

2. How good a job does 401(k) money do of propping up the stock market? Hard to say, but by one measure, it's not particularly important. Investment Company Institute estimates that we sent $78 billion in new money into our 401(k) accounts last year that went into mutual funds. That number hasn't changed all that much: It was $77 billion in 1998. It comes to about $300 million in new money every business day to mutual-fund managers who buy stocks. To ordinary people, that's a lot of money. But an average day at the NYSE and Nasdaq markets sees $70 billion change hands, so $300 million represents less than 1% of the day's trading.

3. How much do people pay into their 401(k)? According to the Vanguard Group, the average contribution to a 401(k) by an employee is 7% of pay. But the spread is significant: Employees with the lowest incomes -- those making less than $30,000 a year -- contribute 5%, on average. Those who earn incomes over $100,000 contribute 10%.

4. How much choice do we have, really? At Fidelity, which administers 8,520 corporate 401(k) plans, the average number of investment options in a plan is 12, up from 7 in 1995. But the vast majority of savers use just a few of those options. At Fidelity, in the latest numbers, 25% of 401(k) participants put all of their savings in just a single investment option. Another 18% use two, and another 18% use three. So 61% of participants divide their savings among three or fewer options.

5. What's the next big thing? Some companies, in an effort to "encourage" 401(k) participation, have what is called "negative enrollment," whereby every employee who qualifies is enrolled, unless that employee fills out the forms to opt out. McDonald's was one of the first to use negative enrollment, although the company has since stopped doing it. In a recent survey by William H. Mercer, the HR consulting firm, 6% of companies with 401(k)s use negative enrollment.

To examine the data on Fidelity's 401(k) participants in detail, visit Fidelity on the Web (www.buildingfutures.fidelity.com).

Charles Fishman (cnfish@mindspring.com), a senior editor at Fast Company, contributes the maximum permitted to his 401(k). He has no plans to retire anytime soon.