June 30, 2008

401(K) Evangelist Spreads the Word

By Michelle Roberts, The Oregonian, Portland, Ore.

Jun. 29--On a recent weekday afternoon, Pil Hwang tells it like it is to an employee at Lake Oswego-based Pacific Lumber & Truss Co. At age 49, the worker has yet to save a single penny for retirement.

"It's not going to be pretty," Hwang says, brow furrowed, furiously punching the sad math into his copper-colored Hewlett-Packard laptop. "If you're counting on Social Security, you're going to be in trouble, man. We really, really need to get you going."

Hwang is an interventionist. Not the kind who nudges addicts into treatment if they refuse to lay off the sauce. Rather, he's a 401(k) interventionist, and it's his job to get in the faces of leery investors and tell them exactly what will happen if they don't start saving for their golden years -- now.

Hwang works as a senior investment manager for Phillips & Co., a Portland-based wealth management firm. One of its franchises is to help businesses select and manage their 401(k) plans, a tax-deferred savings program for employees that took its name from a section of the Internal Revenue Code.

According to U.S. Labor Department statistics, twice as many workers have contribution plans like 401(k)s than have lifetime pensions, a complete reversal from 25 years ago. The shift has meant that employees now bear much more of the cost -- and risk -- for saving for retirement.

As part of their services, Hwang and his co-workers contact nonparticipating employees and extol the benefits of compound interest -- and of being able to afford to eat more than ramen noodles when you're in your 70s.

"A lot of people won't think about retirement unless someone sits right in front of them and forces them to," says Hwang, a lawyer by trade. "For many people, it's just not going to happen unless someone helps them. They don't understand that Social Security is a bankrupt promise."

Hwang's job is not easy, especially in an economy where, in a growing number of households, every penny counts. But Hwang has carefully honed his powers of persuasion. For many of the workers he serves, he translates a $60 monthly 401(k) contribution into terms they can understand: "I tell them that's just one less 12-pack of beer a week." For others, it's 15 fewer lattes.

Hwang's efforts are making a difference. Pacific Lumber's 401(k) participation has swelled from 50 percent to more than 85 percent in the six months since Phillips & Co. took over the account in December.

And that success, says Hwang, was built one intervention at a time.

Hwang visits the companies he serves at least once a month. On a recent weekday, he holds court in Pacific Lumber's break room. Hwang is scheduled to meet with five new employees and try to persuade them to sign up for the company's 401(k) plan, which matches employee contributions up to 4 percent.

Anne Breeze, the company's human resources manager, says Hwang's personal touch has made a big difference. "A lot of our workers would be lost as soon as you put all these forms in front of them," she says. "Pil takes the time to explain to them what's really going to happen with their money."

In his 20s, Hwang worked as a personal injury lawyer. Though he won a lot of cases, he says, he didn't feel he was making a lasting impact on people's lives. "We'd win," he recalls, "and then they'd just waste all the money."

About 10 years ago, Hwang was contemplating a career change to financial planning when he met Tim Phillips, chief executive of Phillips & Co. "Tim helped me recognize the behavioral aspect of people and their money and showed me that we could help them fix that," Hwang says. "We could really improve people's circumstances in a tangible, meaningful way."

Sitting on a metal folding chair next to a crusty microwave, Hwang fires up his laptop and waits for his appointments to show. "It's amazing how many don't want to sign up," he says as Tejano music thumps from a nearby warehouse. "People only look at the bottom-line picture."

Soon, Rob Barton, 40, a newly hired millwork manager, shuffles in. Hwang hands him a form and smiles sweetly. "You ever been in a 401(k) plan before?" he asks.

"No," says Barton, who seems to be a man of few words.

"How many years until retirement? 25?"

"I'm hoping for 15," Barton says.

Hwang punches in Barton's numbers and calculates that if he wants to retire in 15 years, he'll need to put away $642 each pay period.

Barton frowns.

"Or, we could set your retirement out," Hwang quickly adds.

"We'd better go to 20 years," Barton says, sounding disappointed.

After some additional number crunching, Barton becomes Hwang's first sign-up of the day.

Chris Owens, 28, of Sherwood is a tougher sell. He admits that the only retirement planning he's done is deciding where he'd like to be. "The beach in San Diego," he says.

At 35 years from retirement, "You're the perfect age to start," Hwang says. But Owens raises an objection Hwang has heard a million times before. "I'm committed to a retirement plan," says Owens, who's married with four children. "But I want to be comfortable today."

Hwang promises that the before-tax deduction will feel a lot smaller than it looks on paper. Owens signs up, but starts out withdrawing only a small amount. "I trust you, Pil," Owens says as he signs away what to him seems like a fair chunk of his twice-monthly paycheck. "But if I'm broke in 2045, I'm going to come find you."

After Owens leaves, Hwang remarks confidently: "He won't feel it as much as he thinks he will."

Hwang's successful roll ends, however, when Randy Lacy, 49, of Salem strides in. The company's new installation manager eyes Hwang warily.

"Have you done any retirement planning?" Hwang asks.

"No," Lacy says. "And I know I'm behind. I'll have to put away 50 percent of my paycheck until I croak."

Hwang tries to persuade Lacy without sounding alarmist. "You're only 15 years away from retirement," he says. "It's imperative you get started at any level."

Lacy shrugs.

"Even if you just do enough to get the 4 percent match," Hwang implores, voice rising slightly. "That's free money to you."

Money's tight, Lacy explains unapologetically. His daughter, son-in-law and their baby have moved back in with him and his wife. "Even if it's just $50 a week, we'll feel it," he says, folding the 401(k) paperwork and slipping it into his pocket without signing.

Lacy promises to "take it under advisement," meaning he'll talk to his wife. But for now, no deal.

Hwang nods sadly, but don't mistake that for resignation. He'll hound Lacy several more times in the coming months.

"I'm going to keep trying with that guy," Hwang says later, "until I get him."

"We stalked him"

Hwang's been known to go to great lengths to get his clients' employees signed up for their 401(k)s -- and he's not even operating on a commission.

Phillips & Company earns a set fee directly from the mutual funds involved in plans they manage. The rate doesn't increase with each sign-up. For Hwang and his colleagues, the motivation is pretty basic: "We just want to help people."

Once, Hwang's team tried for weeks to get a grocery store truck driver signed up. The driver worked an odd shift -- from 3 a.m. until 11 a.m., and then slept through regular business hours.

After weeks of missing him during visits to the grocery store, Hwang hatched a plot and drove to the store's distribution center in Clackamas County, where he caught the worker just as he was leaving to go home and sleep.

Enrollment paperwork in hand, "we explained the benefits of the 401(k) plan to him and had him sign up on the hood of his truck," Hwang recounts proudly. "Basically, we stalked him."

Hwang doesn't feel sheepish about it in the least. On the contrary, he expects the truck driver will thank him in a couple of decades when he has a comfortable retirement. "We try to find ways to connect with people wherever they're at and whatever stage of life they're in," Hwang says.

Follow-up is an important part of Hwang's job, too. After he signs people up, he calls them at least once a quarter. "We ask them, 'How can we help you? Can you increase your contribution?' "

On this day, before Hwang leaves Pacific Lumber, he checks in with two workers he signed up six months ago, Aaron Stephenson and Caleb Taylor, both 20.

When Hwang was doing enrollments at the company in December, both men, who work in the lumberyard building trusses, declined to go into the conference room where Hwang was stationed.

Even though it was cold and rainy, Hwang decided to give it a shot. "I ran out into the yard and said, 'Hi, I'm Pil the 401(k) guy.' I said, 'Do you know what that is?' They said, 'All I know is it takes money out of my paycheck.' "

On a piece of scratch paper (it was too wet for his laptop), Hwang jotted down some startling computations. At $30 a pay period (the minimum amount each needed to maximize the company's match) Stephenson and Taylor would save $720 a year. Add on the company match, that doubles to $1,440. If they continue investing that -- and only that -- until they retire at 65, they'll each have $1.2 million.

Both signed up.

Today, both greet Hwang warmly.

"Dude," says Taylor. "You were right. We didn't even feel the $30 a month."

Hwang corrected him with a smile.

"Actually, it's $30 a pay period, which means you're putting in $60 a month. And you didn't even feel that."


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