This appeared in my gmail as a paid ad today (Email subscribers, click through to see the poison below):

I'm not a financial advisor.  There's probably money to be made in Bitcoin, although the SEC has issued investor warnings.

The vast, vast majority of your employees aren't qualified to evaluate Bitcoin as an investment option.  When ads like this pop up, I'm assuming they aren't offering Bitcoin as a speculative 5% of someone's portfolio - I'm assuming they want to cram all 100% of that rollover in Bitcoin for various reasons that have to do with money.

Many of your employees have 401ks parked with a previous employer.  25% know about Bitcoin and are interested in the hype.  1/5 of those would consider this ad.

It's worth you getting in front of this with a HR comms piece -  to let people know that ads are rolling encouraging 401k rollovers straight into Bitcoin and there's some danger via the SEC.  

Respect the game.

How do you drive your employees to do more of what you'd like them to do?  Even things that are in their best interest like participating in or raising their contributions to your 401K?

The answer - even in something as non-sexy as your 401K - is for HR pros to think more like marketers.

Check out the video I did below for AXEX - I'm laying out four simple, time-tested tips for driving your employees to take another look at their 401(k) contributions—and put a little bit more into the coffers for their future.

It's three minutes long, you'll definitely learn something...what's not to like?

(Email Subscribers click through for video if you don't see it below)

Two boys on a playground
Tryin' to push each other down
See the crowd gather 'round
Nothing attracts a crowd like a crowd

I'm Gen-X - a lot of you are Gen-X as well.

The Boomers already know that they're getting old.  Some of Gen X understands this is happening to you/us as well.

Need proof?  I give you this billboard I saw in Vegas when I was there last week (email subscribers click through for the picture if you can't see it):

That's right.  Soul Asylum - a band which represents at least some of the angst and disaffection that Gen X loved to simmer in as youth - IS HAVING A CONCERT AT A DRIVING RANGE.

Let that sink in.  Gen X, we're getting old.

Now, it should be said that TopGolf is the Mercedes of driving ranges, and by the looks of the picture, the venue is probably as good as any in the 3K seating/standing range and down in Vegas.

But one of the bands from Gen X's youth is playing at a driving range.

My advice?  Up your 401k contribution, Gen X managers and HR Pros who read this blog, because the end is near!

I've got a saying that goes something like this:

"The best thing about America is that anyone with a good idea can start a company. The worst thing about America is a lot of them do..."

Let me explain that comment a bit.  You have entrepreneurial people in your company and your life.  Some of you best people think they are destined to start their own business, even if their Behavioral profiles tell them (and you) that would result in the life equivalent of a dumpster fire.

Not everyone is cut out to do their own thing.  In fact, most aren't.

Combine that reality with the fact that entrepreneurial life in American is uber-competitive, and you've got the prospect of wrecked lives and retirement accounts.

How competitive is it in America?  Consider the study Ongig released a couple of weeks ago – The Top 70 Applicant Tracking Systems of 2016. I found this study via the aptly-named Tim Sackett Project and here's what Tim had to say to set up the study:

This study is based on around 3300 employers around the world, most in the U.S.  To put that into perspective, there are over 200,000 employers in the U.S. alone with over 100 employees.

I use 100 employees, because once you get to that magic 100 employee number, usually at that point we see companies begin to purchase their first real HR technology – HR System of Record and an ATS. So, it’s a pretty limited sample, but better than anything else you’ll find, plus, it’s a good list of a possible 70 ATSs to take a look at. Also, realize, and I don’t have an exact number, but I would be there are well over 500 ATS systems on the market right now.

A lot of your best employees think they need to go start a company.  This study shows the freak show of competition that exists in America.  Here's the market share of the top companies that represent the tip of the spear when it comes to 500+ ATS providers:

The point here is that unless your employees have a truly novel idea which they can combine with access to capital, they basically have a very limited shot at being successful in starting a business.  True, this is one snapshot, but capital flows to areas of existing and potential need via the efficiency of the marketplace.  Most segments any high potential employee is looking at to start a business will look like this.

If the segment doesn't look like this, you have to question whether theres' a market for the product/service in question.

So let's do some math.  Let's say you're HireRabbit with .04% market share.  Most of the players downstream in this market are going to be SasS companies with limited barriers for customers to get started.  Let's be generous and say HireRabbit is going to get 5K in revenue per customer.  Do the math based on Tim's numbers (200,000 companies) X .04% and you get a customer list of 800 clients.  Do the math and that's annual revenue of $4M.

Then remember this is a company that is well into the top quartile of 500 ATS companies.  Your employee has a great idea to start an ATS - a better way to do applicant tracking.  Is the dream this level?  Probably not.  What's market share look like in quartile 2?  Quartile 3?

Most other ideas enter into similar markets related to competition.  They have to, or the idea is generally not viable.

If you're coaching your star on the math related to starting their own company, you might want to share this.

Of course, it's America.  They can do their own thing.   #AmericaHeckYeah

Here's some advice that will have you giving the "bird" to your computer screen when the past year has witnessed your 401k value chopped by 40%...

"Buy Low, Sell High". 

Giving the screen the "we're number one" salute yet?  It's a cliche', but it's true.  It's human nature to avoid things that are painful, especially shortly after you have experienced the pain - things like being invested in stocks when the market took the elevator down from 14,000 to 8,000 in one year.

I'm not an investment advisor, but take a look at the chart to the right (hat tip to Brett Billock).  It outlines the worst U.S. market declines in history, then illustrates how much the market recovers in 1, 3 and 5 years respectively.

Average rebound of the market one year after the end of a recession?  55.6%.

I know, I know.  The fundamentals are REALLY screwed up this time, and this time is different.  I hear you...

I wonder if they thought the same thing back in 1930?  You know the time, when they were taking the pictures of the dudes in suits standing in front of the soup kitchens?

Repeat - I'm not an investment advisor, and times sure suck.  Still, this chart would seem to be prime fodder for investors everywhere, including 401k participants. 

Buy Low!!

We've been experimenting a good bit on our company-based social network (affectionately named "Sourceapolooza") and I'm becoming increasingly convinced that the killer app for any internal social network is video.  After all, YouTube rocks the casbah, and it's what people now expect/want in any web offering.

The only thing better than video on your internal flavor of Facebook?  EMPLOYEE generated videos.  When employees care enough to create their own videos, in my eyes that's pretty much the definition of engagement. 

Which is why the recent 401k contest sponsored by Best Buy is such a great idea.  More on the contest at BestBuy via HR Marketer:

"Last week one of our team members attended a Webinar about the power of Web 2.0 in talent management. One of the highlights was how Best Buy increased their 401k participation by 30%.

30%? How the heck did they do that?  With a contest. A video contest. They asked employees throughout the retail chain to submit motivating videos that would help increase overall 401k participation. They did just that and the winner is below."

You have to admit, that's pretty sweet, and if you're not the type of HR pro who has their wheels spinning as a result, then... well, you probably need to take a break and find your motivation or consider another career.

If I had to split hairs on the video, I'd say it's too long - if you want people to watch the whole thing, you have to bring a length no longer than a movie trailer - 2:30 tops. 

Still, that's mindless quibbling vs. the impact of employees caring enough to cut a video like this.  What can you do early in 2009 to give control to employees and empower them to get creative on video?

So, the economy stinks.  That's pretty much a given, and most of us have stopped watching CNBC during the day and stopped opening our 401k statements.  It's like 1929, 1987 and 2000 all rolled into one, with the Dow falling from 14,000 to 8,000 in a year. 

Me?  I've got my own leading economic indicators, and they've got nothing to do with the "Money Quotes from Alan Greenspan" tear-away daily calendar on my desk.

I don't need Greenspan to figure this thing out.  Here's my leading economic indicator:

1.  We're officially in a slowdown when Google starts cutting perks.

2.  We're officially in a recession when Google does a hiring freeze.

3.  We might be in a depression if and when Google does layoffs.

Here's the rundown....

1.  It's definitely a slowdown. From the New York Post:

"Google is going on a diet when it comes to spending on a smorgasbord of food perks for employees living high on the hog in its New York office.  The online search giant issued a memo to its Big Apple workforce earlier this week noting slimmed-down cafeteria hours and food selection as part of an effort "to find areas where efficiency can be improved."

The advertising business is expected to be hit hard by the ongoing credit crunch and Google CEO Eric Schmidt said earlier this month that the company would be operating more carefully as ad budgets come under pressure.

Gone are exotic treats like afternoon tea on Tuesdays, which has been suspended indefinitely. However, the company said there still may be "occasional surprise 'snack attacks' in the future" - similar to what employees get in Google's Mountain View, Calif. offices."

2.  I lied before.  I'm still watching CNBC, and it's officially a recession. From CNBC's David Faber:

"Google, one of the nation's great growth engines for employment, has essentially stopped hiring for the last month, according to several executives at the company.

A spokesperson at the company says there has been no freeze on hiring, but several executives I have spoken with who have hiring responsibility said it was made clear to them one month ago they were to make no new hires, including at the secretarial level and they were

directed to fill all vacancies with internal candidates. In effect, they term it an unofficial hiring freeze.

The good news?  Nothing to report on the depression!  No layoffs at Google, at least yet.  If that happens, it trims 1,000 points off the Dow by itself.....

I know - I'm a ray of sunshine...

So, Washington is pretty much a Democratic town these days.  The name of this site is the  CAPITALIST, so you can probably guess that I'm leery of too much government in anything in my life.  Still, I'm willing to be open minded about most things and give ideas a chance.

But, history has a way of showing that whenever the Democrats or the Republicans hold both houses and the White House, over-reaching the mandate given by the people is usually right around the corner.

For example, would you believe that eliminating the 401k Tax Benefit for employees is under consideration in the newly blue Washington?

From the Philadelphia Bulletin:

"Congressional Democrats might enact legislation taxing 401(k) plans if they obtain a supermajority in Congress after the next election. They have shown an interest in revamping the current system and in eliminating the current tax exclusion from contributions.

During the past two weeks, U.S. Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee and U.S. Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support have entertained proposals that would tax 401(k) plans.

Both held hearings laying the groundwork for future legislation that could eliminate most of the $80 billion in annual tax breaks that investors receive by placing their money in the $3 trillion 401(k) system. The plan, which may serve as a model for this change, is by Prof. Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York. It is similar in ways to some European systems.

"Actually there are two plans, said Prof. Ghilarducci, "a short-term one and a long-term one. As part of the bailout, I would include a provision for individuals to be able to swap their 401(k)s at its August 2008 value for special issue government bonds paying 3 percent plus inflation."  Her long-term plan is to rethink the concept of 401(k)s and eliminate the tax deductibility of contributions to them. For example, she said, a person making $40,000 per year who contributes 5 percent of their income to a 401(k) currently receives a tax savings of $560.

For a person making $60,000, who contributes 5 percent of their income to a 401(k), they would have a tax savings of $900. She is proposing that the tax subsidy is eliminated completely. In its place everyone gets a $600 federal income tax credit. This would benefit those who make less.

But in the case of the aforementioned example, while people making $40,000 a year would see a net gain; people earning $60,000 per year would experience a net loss.  A tax increase by Democrats on those making $60,000 per year would not be in line with the  presidential nominee U.S. Sen. Barack Obama's pledge to only increase taxes on those making $250,000 per year."

Wow.  There are two things beyond increasing Federal payroll taxes on normal people that the Democrats could do to ensure Republicans take back seats in Congress in 2010 and 2012.  One is to eliminate or limit the tax benefit for interest payments on mortgages.  The other is workplace related, and that's to eliminate the tax benefit of the 401(k). 

The definition of over-reaching.  Surely that wouldn't happen, would it?  Wow.

Think the fees charged by the mutual funds in your 401k don't matter?  Think again.  Fees always matter, as evidenced by the following chart provided by Alliance Bernstein via the Retirement Plan Blog.  The skinny of the chart?  Lower fees by 1% (which increases return by 1%) translates into about $220,000 extra at retirement—and an extra 10 years of spending.

Curious about the methodology to arrive at the findings?  Here's the breakdown of the AB chart courtesy of the Retirement Plan Blog:

"For the mathematically inclined, following is the methodology Alliance Bernstein used to develop their chart:

Results are simulated. This is a hypothetical illustration only and its results are not indicative of any specific investment, including any AllianceBernstein mutual fund. The savings phase simulates a defined contribution participant salary of $45,000 at age 25, linearly increasing to $85,000 by age 65, making yearly contributions of 6% of salary at age 25 increasing by 0.5% per year to a maximum 10% with a 50% company matching contribution up to the first 6% of salary. In the spending phase, $63,750 (75% of final salary) is deducted at the beginning of each year. A yearly investment return of 9% is assumed at age 25, linearly decreasing to 6% at age 80 and remaining constant thereafter. In the “1% Greater Return Scenario” a yearly investment return of 10% is assumed at age 25, linearly decreasing to 7% at age 85 and remaining constant thereafter. Inflation is assumed to be a constant 3% and dollar values are expressed in real purchasing power terms."

So buck up and make sure your 401k fund selection includes some low-fee funds.  For me, fiduciary responsibility can be summed up in 2 words:  Index Funds, which typically feature low fees with returns beating 70-75% of actively managed funds. 

I saw a defaulted 401k loan from earlier this century (sounds cool to say that) and thought Paulie Walnuts was going to walk around the corner and start asking me for the weekly payment for "protection"...

More on that after the jump.  For now, let's review your role as a HR pro regarding 401k Loans.

Where's your head as a HR pro on the wisdom of 401k loans?  Do you talk to employees who are asking about the procedure about the downside of the 401k loan, or do you zip it and consider it none of  your business?    How does your responsibility as a fiduciary come into play?  Does that responsibility mean you speak up or shut up?

As with all things in life, balance is probably the best approach.  For some employees, taking out a loan against their 401k may be the only source of cash they have in an emergency.  That's hard to argue with.  Employees looking to finance the second waverunner may need a financial consultant. 

Here's your checklist of talking points if you want to advise a member of your tribe of the downside of a 401k loan, provided by the 401khelpcenter:

1. There are "opportunity" costs. According to the U.S. General Accounting Office, the interest rate paid on a plan loan is often less than the rate the plan funds would have otherwise earned.
2. Smaller contributions. Because you now have a loan payment, you may be tempted to reduce the amount you are contributing to the plan and thus reduce your long-term retirement account balance.
3. Loan defaults can be harmful to your financial health. If you quit working or change employers, the loan must be paid back right away. It's not uncommon for plans to require full repayment of a loan within 60 days of termination of employment. If you can't repay the loan, it is considered defaulted, and you will be taxed on the outstanding balance, including an early withdrawal penalty if you are not at least age 59 ½.
4. There may be fees involved.
5. Interest on the loan is not tax deductible, even if you borrow to purchase your primary home.
6. You have no flexibility in changing the payment terms of your loan.

That's a pretty strong list, especially the one saying that if an employee leaves the company, they must payback the loan in the short term.  If an employee is taking out a loan from the 401k in the first place, they probably don't have the means to do that, which likely means default.

So back to the loan that made me flinch from visions of Tony Soprano and Paulie.. Here are the specs of the loan from 2000, which was part of another plan, a long time ago, in a land far away (enough disclaimers?):

-Original Loan Amount - $8,600 and change...
-Interest Rate - 11.5% (ouch)
-Total Payments Needed to Retire Loan - 390 (15 years)
-Total $$ Needed to Retire Loan - $18,000 and change (Meaning over 9K in interest expense beyond the $8,600 principle)..

Again, some employees won't have access to any funds other than their 401k in emergencies.  That's OK.  But coach everyone who asks about the realities related to a 401k loan, especially if the loan must be paid back immediately after the employee leaves the company.