|
Ed Johnson, John Fletcher and Trisha
Brambley have three things in common: they were the first-ever 401(k) plan participants,
they were a bit skeptical of the idea, and today they're rather wealthy.
In 1981, these three worked for The Johnson Companies, an
employee-benefits consulting firm in suburban Philadelphia. A co-owner of the company, Ted
Benna, had just created a new retirement savings plan called a Cash-Op, the name he gave
to the 401(k) plan. Unable to sell it to any of the firm's clients, Benna decided to use
the plan for his company first.
John Fletcher, the first plan participant, was also the
first plan trustee. "I didn't really understand the historical concept of what was
happening. I was the first that had the form in," he said.
For him, participating in the plan was something of an
academic exercise. He had a math background and ran a projection of what he could build in
savings over 20 years. The answer: somewhere close to $1 million. That's just about what
he has in his account today.
"It would have been more than $1 million if not for
the most recent turn in the stock market," he lamented.
Fletcher left The Johnson Companies in 1988 to start his
own benefits company and astutely rolled his 401(k) money into an account there.
Currently, he is a consultant with Plan Advisory Services.
When asked how he managed to build his balance, he replied,
"The one thing I've always done is I've never borrowed against it. I never took a
hardship withdrawal."
In other words, he never touched the money and continued to
add to it.
Johnson's 401(k) Journey
Ed Johnson, The Johnson Companies' CEO, was the skeptic of
the bunch. He read the ways the winds were blowing in Washington and they were definitely
against payroll-deduction plans like Benna's.
"At the time, there was a rather negative attitude in
Washington about any kind of salary reduction that would become a tax expenditure,"
he said.
In 1990, he sold The Johnson Companies and formed yet
another benefits consulting business. Eventually, he rolled his 401(k) money into an IRA.
Now, at age 70, he is retired and earlier this year started to take the first
distributions from the IRA.
He declined to say how much his account is worth, other
than to say, "I never in my wildest dreams would have imagined building up so much
money."
A Million and Growing
Trisha Brambley, who was hired at The Johnson Companies as
Benna's plan started to gain momentum, immediately saw the benefit of the plan, which
allowed employees to contribute directly from their paycheck. "I was a big proponent
of saving through payroll deductions," she said.
She ran the projections, too, but didn't see the potential
reality. "I guess I didn't play it out for 20 years, that's for sure," said
Brambley, now president of Resources for Retirement Plans Inc.
That said, today, she admits, "I'm a 401(k)
millionaire."
Like Johnson, she didn't expect the government to permit
this wonderful tax shelter to continue. Even if Congress repealed the 401(k), she figured
she wouldn't have to make up the taxes on her deferrals. "The government doesn't
usually go back and retroactively tax," she said.
She, too, left The Johnson Companies to form her own 401(k)
plan consulting business. To this date, she has never touched the money. Now in her 40s,
Brambley views herself as being too young to retire.
Looking back at her 401(k) success, the one point that
she's struck by is how much flexibility she has with her future. "You can actually
ease out of employment, instead of the way it is in a defined-benefit plan where one day
you are working and the next you aren't." |
