Realistic Dream Starter Workshop

The retirement industry’s approach to 401k education – used with millions of employees for 30 years – is the largest failure ever of adult education.

What does failure look like? $300 a month or less. That’s how much income half of the participants in their 60s – those below the mid-point of account balances for that age group – should expect from their 401k “Retirement” Plan. (At age 65, $85,000 – around the Vanguard account median – times 4% [withdrawal rule of thumb] is $3,400 a year…$283 a month.)

Failure From the Start

I’ve been a critic of 401k ed since the early 1990s because:

  • It provides no understood, believed, and realistic target of the future account balance they want,
  • It lacks essential adult-learning principles and competency definitions,
  • It is delivered by un-trusted “experts” who tell financially inexperienced adults what to do (telling is a terrible adult-teaching approach), and
  • It does not energize the individual’s motivation to make the sizeable contributions necessary to buy the future financial lifestyle they want.

A Better Approach?

I’m familiar with basic education principles – but I’m not an expert. Yet I’ve created the Realistic Dream Starter Workshop as a “rough draft” of how of 401k ed could be.

The first principle of the Dream Starter is to eliminate for future retirees the biggest regrets existing retirees have of using a 401k – not starting earlier and not contributing enough.

The Workshop consists of:

  • Competencies – statements of specific knowledge and behaviors that enable young employees to begin the career-long purchase of the future financial lifestyle they want – this is the foundation program’s curriculum,
  • Invitation – the meeting announcement and a contest entry form designed to get employees thinking about their future financial dreams,
  • Learning Materials – a 90-minute, “live” interactive meeting conducted by a coworker they already trust – using the scripted presentation, “Do You Really Want to Work Forever?”
  • Personal Future Lifestyle Price Worksheet – a future income projection employees complete individually to discover the realistic price of the largest purchase they will want to make – their retirement. (Something 80% of adults do not know.)
  • Questionnaire – a short, multiple-choice test that helps indicate which employees have – and haven’t – acquired the competencies.
The Dream Starter program addresses three critical questions:

  • What is the minimum knowledge employees must have to start using a 401k successfully?
  • How will ed providers determine if employees have this knowledge?
  • How do plan sponsors select and manage 401k ed providers to ensure they help employees acquire this knowledge?”

Dream Starter is intended to turn young employees into future income consumers who – throughout their career – will want to learn more about how to buy the future financial lifestyle they want.

High Trust – No Telling, No Selling

The program is delivered by a known, trusted person (either a current employee or retiree) so employees know they are not being “sold” something. The program does not use a funny computer character or other cute animation to disguise the ineffective approach of telling employees what to do.

The program uses thought-provoking questions and proven learning techniques help employees discover the realistic price of the future lifestyle they want. They also discover what they need to do have an account that will pay for it.

It does not use “black box” calculations for the “illusion of precision” dollar amounts 30 or 40 years into an unknowable future (maybe bitcoins then?). For young employees, personally meaningful, understandable, and realistic concepts are more effective than seemingly sophisticated, assumption-laden “calculations” of amounts decades into the future.

Simple-to-Understand Concepts

Dream Starter is designed for “non-numbers people” – the 50% or more of US adults who struggle to calculate a tip, miles per gallon, or interest on a loan. It is not for the numbers-loving finance and investment pros who are unlikely to attend a “basic 401k” meeting.

The program is jargon-free. And, there’s no mention of “retirement” – something young employees may wrongly believe they can postpone preparing for until their 40s. And because it’s for young employees for whom contributing is currently much more important than investing, there’s no mention of the efficient frontier, smart beta, market capitalization, or other investment lingo. An investing ed program will become more important later as employees build their accounts.

It’s Only an Example

Certainly, there’s room for improvement in the Dream Starter program. But unlike existing programs, it hasn’t yet been proven to be a failure.

Perhaps Dream Starter will nudge the retirement industry to action. The industry should gather leading authorities in adult-education, instructional design, educational neuroscience, and other learning-related academic fields to create and test more 401k ed demonstration programs. Employees deserve an education program that works!

If you’re interested in the Dream Starter program, there is more information HERE.