A Week in the Cays—Or a Bigger 401(k)?

Posted on Nov 28, 2012 | 3 Comments

Would you rather have an extra week off each year or a little more money in your retirement account?

Most Americans say they’d like the week off. In fact, according to an interesting new survey and infographic by the consulting company Mercer, short-term benefits tend to trump long-term benefits in the eyes of most U.S. workers.

“Employees in many countries place greater value on certain reward elements that actually offer them less value, over time, from a financial or wellbeing perspective,” Amy Laverock, a partner with Mercer Marsh Benefits, remarks in the survey’s introduction. In a longer version of the report, the writers state that the “fact that most employees are not saving enough for retirement and value their 401(k) programs lower than an additional week off is alarming.” They add: “Employers need to consider their roles in educating employees to think more long term in making benefit choices.”

Peter Drucker always warned against short-term thinking, which he considered to be a plague in business and economics. On this topic, he liked to refer to the economist Joseph Schumpeter.  “Schumpeter . . . knew that today’s short-term measures have long-term impacts,” Drucker wrote in The Frontiers of Management. “They irrevocably make the future.  Not to think through the futurity of short-term decisions and their impact long after ‘we are all dead’ is irresponsible. It also leads to the wrong decisions.”

Giving into short-term thinking also caused Drucker to fail (in his own view) during an early stint as an academic administrator. “I thought I’d win friends and influence people by giving them some short-term goodies,” Drucker recalled.

But Drucker also cautioned against dismissing choices or preferences that differ from yours as irrational (a foible for which he cited “economists, psychologists, and moralists”). To condemn the choice of vacation over a 401(k) contribution is to assume that an extra week off is something that no employee could rationally prefer. But in a nation where leisure time is scarce, that’s a bold assumption.

Photo source: VanWas

As Drucker put it, “You have to start out with knowing what the customers really consider value, what is important, before you communicate, rather than with telling the things you believe should be important to the customer.”

How much long-term benefit would you sacrifice for the sake of an extra week of paid time off?

3 Comments

  1. harold Goffeney
    November 30, 2012

    That would depend on how long the employees has been at the company.

    Besides u now know that ur 401k can be wiped out by throwing the company into quasi or bankruptcy.

    In today’s knowledge workforce. Retirement investment in a company might not be the best choice. Yeah u get stock options only good if the stock price is stable.

    But a bird in the hand is worth more than 2 in the bushes.

    I pass on the vacation and just get the cash. Is algebra how much is it going to cost to book the vacation on a bulk vs what ur week is worth?

    Reply
  2. Maverick18
    December 1, 2012

    When banks, auto makers, airlines and even cup cake bakers are going bankrupt, why would any employee opt for a long term promise over a short term reward?

    Reply
  3. Gary Gienger
    December 18, 2012

    Positive returns on 401Ks have been non-existant for 10+ years. The government intends to use income tests to reduce social security payments or increase the amounts, such as for Medicaid, that must be paid. On top of that, we are now said to be facing a decade or more of 1% economic growth.

    Personally, I have done far better with investments outside my 401k. So, while I don’t recommend not saving, I am glad I did not put all my investable money in 401Ks. I see little use in continuing to feed a dead horse.

    Reply

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