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Exclusive Interview: Ted Beck – 401k Process Must Be Demystified

Exclusive Interview: Ted Beck – 401k Process Must Be Demystified
December 19
01:08 2017

Ted Beck, president and CEO, National Endowment for Financial Education, has been a member of the President’s Advisory Council on Financial Capability for Young Americans, a panel established by President Obama to promote and enhance financial capability among young people. Beck also sits on the Federal Deposit Insurance Corporation (FDIC) Advisory Committee on Economic Inclusion, and is immediate past chairman of the national Jump$tart Coalition for Personal Financial Literacy. He previously served on President George W. Bush’s President’s Advisory Council on Financial Literacy from 2008 to 2010.

FN: Ted, thanks for agreeing to sit down with us. We usually like to begin by having you share with our readers something interesting about yourself that led you to where you are today.
Beck: I’ve been fortunate to have a wonderfully diverse career. With my first job I spent more than 20 years in senior management with Citibank/Citigroup helping successful companies become more successful. I then helped students become more successful during my time as associate dean of Executive Education and Corporate Relations at the University of Wisconsin-Madison School of Business. And it’s gratifying today to see what we have accomplished at NEFE—encouraging organizations to deliver financial education programs, developing tools and resources, and making them readily available to people through every stage of life. It’s a bit full circle now helping Americans become more successful in their financial capability.

FN: Tell us more about NEFE. What does it do? Where does it do it? Who does it do it for?
Beck: We’re a completely nonprofit, nonpartisan and independently funded organization providing tools—and encouragement—to help people overcome financial challenges. NEFE has been focused on financial education for more than 30 years. All of our programs are free and non-commercial. We don’t make any money off of what we do or what we provide. We believe financial education should start early at home and in schools and continue in the workplace on through to retirement. To fill that demand we have programs for high schools, colleges and employers. We are very proud of our partnerships in which we have worked with more than 140 specialized nonprofits and charitable organizations. We also have been cutting edge with our focus on behavioral research, working with some of the best thinkers globally in financial education.

FN: Over the last decade, we’ve seen a change in focus within the retirement plan industry from investments to saving. Why is it more important for people to learn how to save than it is for them to learn how to invest?
Beck: Both are important. The retirement rules have steadily changed over time and people are more on the hook for securing their own well-being. With the Great Recession people understood that bad things could happen to no fault of their own, for instance housing declines and stock market volatility. It’s a continuous process working to instill self-confidence in those who are financially unsure. First you have to get them to figure out a way to save money. But all retirement plans assume a return of just 5 percent to 7 percent, so if you’re not investing you will not achieve future security. You need both saving and thoughtful investing to be successful.

FN: What’s the biggest savings mistakes you see people make? How can they avoid them?
Beck: Commonly I would say not having an overall game plan for retirement and not taking full advantage of your company savings plans, specifically where an employer matches money. Beyond that it’s not being fully prepared for income disruptions and unexpected events. Not one of us is safe from periods of lost income due to a health crisis, job loss or other life transitions during our working years. We’ve done research that finds these income losses—defined as an annual earnings drop of more than 10 percent—are so common that 96 percent of us will experience four or more of these income shocks by the time we reach age 70. But smaller setbacks frequently happen too—the car breaks down; an appliance goes on the fritz. We have to understand these expenses as not if they will happen but when they will happen. This is where the importance of an emergency savings comes into play, so we don’t go deeper into debt or borrow from our retirement savings.

FN: Richard Thaler, who was awarded his Nobel Prize in part because of his “nudge” theory in behavioral economics – a theory that, when applied to 401k plans, helped increase participation dramatically – recently said he favors lowing the cap limits for retirement plan contributions (the number of $2,400 was thrown about). Why do you think Thaler is right or wrong about the relationship between tax-deferred saving incentives and people’s savings behavior?
Beck: I think tax-deferred savings incentives are a great opportunity for people to enhance their overall retirement strategy. Additionally, there has been a good deal of success with automatic enrollment, requiring employees to take an active step if they wish to opt out. In general, I am behind any idea that puts savings on autopilot and takes a lot of thought out of it. Take for example every time we get a raise in our salary. We should automatically have our savings contributions adjust accordingly when that happens.

FN: What do you think can be done to encourage workers to save more in their 401k plans?
Beck: First I think we have to recognize that all Americans are capable in their ability to achieve financial well-being, whether that’s saving through a 401k plan or other method. Sometimes we overwhelm people in explaining the 401k process—we have to demystify this. Another thing that I have seen work is positive reinforcement from peers and colleagues. There was a great research project out of Dartmouth where employees via video shared their success stories about saving through a retirement plan and encouraged others to get involved. Aside from simplifying the process and increasing motivation people should get in the habit of performing a regular review to see the success they are having. This also is an opportunity to assess if you are saving all they you can.

FN: One idea possibly gaining is the 401k MEP, where multiple unrelated employers could pool their retirement plans together under one roof with one independent trustee. While this may encourage many small businesses to offer a 401k, MEPs are currently only available through business associations. Does NEFE have a program that helps business associations develop MEPs? How might MEPs help encourage more saving for retirement?
Beck: This is an interesting concept that could be attractive not only to participants but also small businesses so long as it is cost efficient and flexible. I think this is an extension of workplace education which is largely untapped. Providing financial education in the workplace is a great way to reduce money worries among employees. But offering it in connection with potential programs like this can be a healthy way to encourage participation.

FN: Let’s talk about financial literacy for a moment. Developing employee educational programs continues to be a challenge for plan sponsors. What hints or recommendations can you offer that can be implemented quickly and easily? How about those that might take more effort?
Beck: Sometimes these educational offerings come from 401k plan sponsors and if someone is selling alternative services or pitching investment opportunities people tune out pretty quick. It’s also a challenge from the employer side as companies often worry about potential liability of being perceived as an advisor. What if something goes wrong? Yet over the years we have seen strong interest in boosting workplace education. Not only is it a great way to reduce stress among your employees, it also gets people proactively involved in their financial future. We at NEFE have worked very hard to address this demand. We’ve expanded our educational platform Smart About Money ( to fill the void as a noncommercial entity in this space. I am encouraged that more than half of people using our program are between the ages of 18-35, which is the emerging workforce.

FN: Sometimes the best way to learn is by doing. College students often find themselves facing real-world financial decisions for the very first time. What programs does NEFE offer this age group?
Beck: Colleges are being more responsible, and we are proud to be working with them. A decade ago we launched CashCourse (, a turnkey program for universities. It covers a range of topics for freshmen through graduates in their first year or two out of college, like understanding financial aid, paying for college and getting ready for the world of work. CashCourse is free, noncommercial and is under each school’s name so it provides instant credibility. We’re now at 1,100 colleges using the program. In particular, the Iowa state system and the community college system in California are tremendous examples of the success we’ve seen.

FN: How about at the high school level? How can we better prepare them for that real-world they’ll soon be graduating into?
Beck: I always say that financial education must be provided throughout an economic lifetime. The initial inoculation comes from teaching kids when they are young and then booster shots are needed as you experience life’s financial events. High school is one of our centerpiece activities. Since 1985 our free High School Financial Planning Program ( has been helping educators offer this important information to youth. The program meets state standards, is taught in all 50 states and reaches approximately 900,000 students each year. Very often this comes from an individual teacher to recognize the importance of helping their students build this life skill. But we need better infrastructure to teach financial education in schools. This isn’t just a national strategy to offer financial education to high school students, but also a plan to better prepare teachers. A few years ago, we did a study (through the University of Wisconsin) looking at K-12 teachers and found that just 29 percent were teaching financial education and less than 20 percent felt very competent to teach it. Teacher training is critical and NEFE has helped launched a program to help prepare educators as well.

FN: What are your thoughts about getting even younger children involved in savings? One traditional way to get pre-teens accustomed the art of finance is through an allowance, although that tends to focus on spending. How could something like a Child IRA teach young children more about the benefits of saving? [Ed. Note: You can read more about it here: – just scroll down below the sliding picture and click the links to the relevant articles.]
Beck: NEFE has been involved outlining a similar strategy called ROTH at Birth. No matter how you phrase it this illustrates one of the long-standing tenets of financial education—the time value of money. We need to be extremely diligent in getting young children to understand the importance of saving money early. You also mention allowance, which I think can be an important teaching tool. But it must be exactly that—a teaching tool. Be consistent with it and allow your children to make mistakes. Parents have the most influence over how their kids will develop behaviors about money so talk to them often and don’t lecture. Be a good role model and set a positive example. Remember, your mistakes can be a valuable teaching tool as well.

FN: Ted, are there any other thoughts or ideas you’d like to share with our readers?
Beck: I would like to see national attention paid to getting financial education in schools and in front of every child in this country. It has an impact both socially and economically. But that is just one part of the equation. We need quality standards with programs—programs that are vetted, contain relevant subject matter, and have been evaluated to show effectiveness. Until that is in place it is up to parents to continue their efforts. Regardless of gender, ethnicity or income status, talk to your kids about money. The lessons you provide are valuable beyond measure.

FN: Ted, thanks for taking the time to share your views on financial education with our readers. As you mention, this is a critical part of achieving financial goals. I’m sure NEFE will continue to impress us with its efforts.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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