I got the idea for this post because I remembered one older nurse. When I recalled that older nurse, I recalled another nurse and others and some attitudes I've come across working with other nurses. My hope is that this post will encourage you to start contributing to your employers retirement plan if you don't already. If you do, I hope you will look at increasing your contributions.
The first nurse had not set up a work 401k. Actually, she's not the only one I have encountered who didn't have one. Oh...wait...She isn't. I encountered another one years later who also hadn't set one up. Dear Nurses in the US, not signing up for your employers 401k is giving away free money. Free Money!
In the past four or so years, I've helped a colleague sign up for one. She is a nurse - RN. There are people I've helped set up their work 401k at work simply because it comes up and I tell them that they are missing out on free money. There was one lady I worked with in an ER. She isn't a nurse; She functioned in another role. When she saw me at another hospital in recent years, she told me that she remembers me for that. Ha. In her case, I think I encouraged her to start at $30 per paycheck or so. I think she asked me for help again to increase it. I saw her shortly before I FI/RE'd and that's the one thing she still remembers me for.
To be honest, I didn't start contributing to my 401k until about 6 years into my nursing career. It doesn't mean I wasn't investing. Still, that's 6 years of money I missed. Even worse, I externed in college and could have contributed to those accounts as well. For one hospital I externed at, I didn't even know Prudential had my information until the last hospital I worked at switched to Prudential. (BTW, the retirement portion of Prudential was acquired by Empower - just in case this posts makes you want to go see if you have an account somewhere). Why didn't I contribute early? I had plans of traveling around the world and didn't anticipate staying at the first hospital for a long time. I actually worked there full-time for about 4 years and then switched to Part-time when I started working PRN elsewhere. Please note that in the mean time, I was saving and investing albeit very conservatively. I started aggressively investing about 4 years into my career.
In the course of time, I have encountered some reasons why nurses don't contribute to their retirement savings and I'm going to address some of them:
Reason #1: Not knowing about it
With the older nurse I referenced at the beginning, my impression was that she wasn't aware of it and had not signed up all these years. A part of me wonders if it was because she had banked on what she thought to be a better retirement policy - marrying a doctor. Although my private conversations with her let me realize that things weren't as one had hoped at the beginning. And so after being out of work for a long time due to an injury, here she was working so she could pay her kids college tuition. Yes, she was still married.
There are also others who just didn't know that the hospital offers a retirement option. And if they do, they don't know how to sign-up. There are people who I've had to help set up. There are some who have logged in and asked me to help them choose the funds because they don't know what to do. In my opinion, such a person is still actively taking steps towards doing it right. If you don't know what to do, you can call your 401k custodian and hopefully someone there can help you out. If you use Fidelity, they have advisors who can help you out. Also, custodians usually have advisors assigned to your hospital or organization.
For those of you who may not be familiar, your custodian are companies like Fidelity, Vanguard, Empower, Voya, etc who are in the Retirement business. Prudential excited and Empower took over their retirement business. Their websites also provide a wealth of information. I'm not familiar with Voya but know that they serve certain companies as I had someone who had an account with them. Most of these custodians offer a wealth of information on their website. Spend some time there and read up and learn. Some also offer free consults. Take advantage of these resources.
If you are a new grad starting a job, ask your HR person if they offer a retirement plan and ask how to sign-up for it. When I left my employer recently, their contributions was more than 10% of what I transferred.
If you are a new grad starting a job, ask your HR person if they offer a retirement plan and ask how to sign-up for it.
There are also some who know about it but don't know how to sign up or what to pick. There are times people have opened their account at work and asked me to pick funds for them. There are times I try to explain and teach them how to screen funds by looking at expense ratios and other factors so they can do this themselves and some just don't want to know. I recall a few years ago when my employer changed custodians and I was on a unit where people were asking this one girl what funds they should put in and basically chose the mix she had. But the thing is that everyone's risk appetite is different. That and you also need to factor how close you are to retirement and invest accordingly. When in doubt, the custodians have advisors who can help you choose. I'll say that be careful of choosing an annuity inside a 403b account. The Bed, Bath and Beyond fiasco isn't the only example. I myself experienced the ramifications of having one inside an account when I left. To sum it up: Fees!
Reason #2: Choosing to not contribute.
Did I know my employer had retirement savings? Yes. I recall seeing emails about a rep from Fidelity coming on site when I started as a new grad. I just didn't bother because I saw myself leaving soon. Initially, it looked like I was going to be there for a year since I took a 1-year sign-on bonus. My thought was that I was leaving the next year. Another friend also came to that same hospital and she left. It wasn't just because I was leaving in a year, I also thought I was going to leave the country and go elsewhere. Where? Belgium. O the young and adventurous me 😄. I also wanted to work with MSF (Doctors Without Borders) and so I saw myself going from place to place. The funny thing? I didn't leave that first hospital until about six years later. I switched to part-time after 4 years and left two years later. I could've taken advantage of their match all that time. I didn't even contribute until I left and was working PRN at two hospitals.
Yes, If you are a nurse working PRN, you can contribute to the 401k and they will match. They just don't tell you about it and because most people think they don't get benefits, they also think they don't qualify to contribute to the retirement plan as PRN personnel. So the irony is that I didn't contribute where I worked full-time but contributed at the place where I worked PRN. However, after I started, I realized the tax benefits of contributing and really aimed for the max.
Reason #3: Irrational excuses
I recall a colleague about 8 or 9 years ago say that she doesn't know how long she would live so she's not saving in case she dies early. There's a reason why insurance companies have actuarial tables. The person who said this was likely in her late 40s or even older. Is she still around years later? Yes. I'm likely to think that she has not bothered saving still. There are some who want to buy an expensive car first and then they will look for something to invest in that generates a quick return. I could go on and on but whatever reason you are telling yourself, it might be good to start contributing with little for now. Besides when you pass, your children or other beneficiaries can inherit your account so it's not like your employer keeps the money.
Reason #4: Past experiences.
I recall a colleague telling me sometime after the pandemic that due to what happened to 2008, she is not going to buy a house. She also was someone who was not contributing to a 401k and I encouraged her to sign up. of course, shortly after she did in 2021 or so, there was the time in 2022 when the market dipped and she came to me saying that she's losing money. I told her to stay the course and sit tight. There are some people who would come out me to complain that the market is going down and it's usually during a short dip. I'm just realizing that they don't come to me when it's going up. I recall one guy saying that I usually say something to calm him down. And that's what good financial advisors do. If you do one, they really should be managing more than your investments; they should also be managing your behavior. Behavioral investing is it's own field. If you are paying for an advisor, get one who is managing that or do your best to read a book (or two) on Behavioral investing and manage yourself. You can't look at the past and say that the market went down in 2008 and so you won't invest. That was a recession; there was a Depression back in the day and the market didn't stay that way. In fact the S&P dipped to the 600s back then, look at where it is now. We shouldn't let little blips of experiences in the past affect our future.
What is interesting is that when stores have sales, we rush to buy. But when the stock market has a dip (sale), we are fearful and stay away. Learn to be greedy when others are fearful. Manage risk and realize that the bigger the risk, the bigger the reward. Investing is about risk and a good part of it is managing that risk. Now regarding the colleague I mention in this section, there was a time where she was looking for a new house to rent. The Federal Reserve had ZIRP after the pandemic and that was a great time to take advantage of the low rates in light of inflation. Why? Because the money is worth less later on as a result of inflation. This was someone who worked almost everyday and could definitely afford the house as her kids were older. She also hadn't set up a 401k and I'm glad I got her to sign up. I hope she has stayed the course. Rent prices have almost doubled over the last decade and half and so to rent on social security while making car payments and what not, that is a lot. When housing is out of that equation, it gives you a lot more breathing room to enjoy life when you have FI/RE'd.
Reason #5: Not knowing the tax-saving benefits of Retirement plans.
Let me start with this: a good tax professional shouldn't just file your taxes and tell you how much refund you are getting. A good tax professional should also help you with some basic tax planning and counseling you on how to save on taxes. The focus shouldn't be on refunds only but also on other tax saving measures. I paid a lot of taxes my first year as a new grad. Had someone pointed out the tax saving benefits of my 401k, I would've jumped on it. What's even worse is that my first hospital had both a 401k and a 457. The older me would've contributed to both had I known what I knew a decade ago after I had left. Now for a state like PA, there aren't state benefits when you contribute to a retirement plan because they tax you going in but don't tax you when the money is coming out. Ever wonder why some people in neighboring states move there when they retire?😉 Generally, the amount you contribute is not taxed by the state and the Feds. I don't know if there are other states besides PA that are an exception. Therefore, you save paying taxes on the amount you contribute. In the even you move to PA or FL or other states where you don't pay tax on retirement income, you essentially end up not paying state taxes on it on both ends. The Feds do tax you when it is coming out but your retirement income may be less than what you make working full-time and you may fall into a different tax bracket.
Another tax benefit of retirement contributions is the Saver's Credit. This is a tax credit you can take when you file your taxes. At some point after 2016, I worked PRN and my taxable W-2 gross was in the 30s. I maxed my 401k contributions but that doesn't count towards my gross. There were times I would do some tax planning by contributing to my Roth or Traditional IRA accordingly to benefit. At some incomes, you are capped on how much you can contribute to a Traditional IRA and if you are not comfortable using the IRS worksheet to figure it out, Fidelity has a calculator on their website that can tell you how much you can contribute. If you don't qualify for the tax deduction associated with the Traditional IRA, you can also do a Roth conversion right away. Either way, you may be eligible for the Saver's credit. I wasn't eligible when I went to work full-time some years ago but it came in handy last year and I was so grateful for it.
In recent years, more employers are offering Roth 401k or Roth 403b. I got the chance to contribute to this right before I fired so for the 3 months I worked, and I barely worked one of those months and took days off the other two months, I basically siphoned my money into that. I had no PTO left when I FI/RE'd. The only PTO payout I got was half of the 4.xx hours I earned the last pay-period I worked. It's low because I was Part-time so I only earned half of what a Full-time person earned.
The advantage of having a Roth 401k or Roth 403b is that you can contribute more than you are allowed to do in a regular Roth IRA. You pay taxes on your contributions going in but don't pay taxes on the earnings and principal when the money is coming out. While some people strongly advocate for Funding a Roth account first before others, I am more a proponent of looking at the big picture and funding accordingly. That is you may need to contribute to both accounts and not fully fund either depending on your situation.
Reason #6: Too young.
Some people think they are too young to start contributing towards retirement. I was about 22 when I graduated. I worked as an extern and saved conservatively (CDs) prior to that. I know some new grads focus on "enjoying life" and that includes lots of travel and extravagant cars. There are some colleagues who buy lunch when we work. Post-Pandemic, eating out is very expensive to do daily. For some, it is twice during the shift. That adds up. The thought seems to be that they are young and have a lot of time to contribute. But the best time to contribute is when you are young because of the Time Value of Money. The power of compounding works best with time and so it is ideal to start young than to start later. There are multiple resources around the web that shows how a 24 year old or whatever can start and contribute for 10 years and stop while a 40 year old starts and contributes to 65 and still ends up with less or the same as the 24 year old who didn't contribute anything after a while. Therefore the best time to start is when you get out of college as a new grad nurse. If you didn't, it's not too late, the next best time is now. I have a colleague who didn't start until around 2010 and when we spoke sometime ago, he was getting ready to retire. Now he worked a lot and saved aggressively and even held a tech fund. We would talk about the market sometimes. This isn't to encourage you to wait until you are 50 to start, start now.
Reason #7: Too much debt.
In a few cases, I have come across nurses who claim they can't contribute because they have credit card debt. Yet, they talk about their vacations and even fly out of the country to go watch their favorite celebrity perform. It is really up to you. You can keep working until you are 70 or you can aim for Financial Independence and Retire Early (FI/RE). It's your life; the choice is yours.
Looks like I came up with 7 reasons. I didn't have a number when I started. My hope is that this post encourages you to start saving or it at least encourages you to look at what your employer offers. Nursing offers a good path towards FI/RE although bedside nursing isn't something I'll recommend for long. Patient acuity is higher. Work smart and save smart. I'll say this: Insurance is not Investment. Do not let someone convince you to withdraw your workplace savings at age 65 and put it into some insurance. And it is one of those insurance products that resembles an MLM in that there are different tiers of people. I heard someone say she did that😮🫢
Insurance is not Investment.
Is nursing a good path to FI/RE? Yes...if you work smart and save smarter.
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