Rolling Right Along

I BEGAN MY CAREER as a part-time employee for an engineering consulting firm. At the time, I was working on my master’s degree in mechanical engineering. I shifted to full-time when I’d wrapped up my coursework but before completing my research and oral defense.

Over the next four years, I finished that degree and passed the national exam to become a registered professional engineer. I also got married, and bought a dog, a second car and a house. In other words, I jumped straight into middle class life.

I was the company’s seventh employee. The firm grew and I progressed. When I turned age 30, I opened IRAs for both me and my wife, thinking we’d never work for companies that provided pensions. An acquaintance recommended I choose Vanguard Group’s S&P 500-index fund (symbol: VFIAX) and Windsor Fund (VWNDX). At the time, an individual’s annual IRA contribution was limited to $2,000. In the early 1980s, my employer introduced a 401(k) plan and I immediately joined. The plan was administered by a bank and the fund offerings were less than stellar, but it allowed me to contribute more than $2,000 a year.

Meanwhile, after some years of success, the company started to struggle. A slowdown in our core business led to shrinking paychecks for principals like me, so I ceased contributions to the 401(k). Everyone else did, too. I found out the company hadn’t made all the plan contributions for months, even though the money had been withheld from our paychecks. We later learned that the same was true for state and federal tax withholding.

The chief financial officer monitored the mail for checks every day. One day, he received a check large enough to cover all missed contributions to the 401(k). When he returned from the bank, he turned in his resignation, cleared out his desk and left. He later told me he felt obligated to make sure the 401(k) plan was whole before he quit. What about the unpaid tax contributions? He said those were the owner’s fault. The company eventually folded, and I rolled my 401(k) balance into my Vanguard IRA. It was an empty feeling to have devoted 14 years to the company, only to see it fail so terribly.

When I was at the firm, my largest client was a local power company. It offered me a job almost as soon as I was available. This was a large company that offered a 401(k) and a pension plan. After a year with a regular engineering group associated with plant repairs and upgrades, I was assigned to a problem-solving group with higher visibility and more responsibility. I enjoyed the work, but the administrative and bureaucratic requirements were tiresome. I made regular contributions to the 401(k) and received matching contributions in the form of company stock. The 401(k) match vested after five years.

But the board of directors brought in a new, aggressive CEO who promptly announced layoffs—which included me. A “transition benefit” was immediate vesting of 401(k) matches. The financial markets approved of the new CEO, so the company’s stock was performing well, and my four years’ worth of matching contributions tripled in value. As soon as I was laid-off, I liquidated the 401(k) and rolled the proceeds into my Vanguard IRA.

My next employer was a small technology company developing a filtration process for extracting particulate matter from hazardous waste streams. This was an exciting time. The patent had just been awarded and the founders were assembling a prototype for testing. I authored several Small Business Innovation Research (SBIR) proposals that were ultimately funded by U.S. government agencies.

I stayed there four years, contributing part of my earnings to a SEP-IRA. During the final year and a half, it became clear that the filtration test results weren’t as good as expected. Company income, totally dependent on SBIR contracts, was falling. So were our paychecks. I left when it became obvious that the technology had no future. Again, I rolled my retirement money into my Vanguard IRA.

I quickly landed a new job as an engineer for a small software company. The software product was an engineering program that helped with design improvements. It was extremely popular with some engineering companies. The company had a Fidelity Investments’ 401(k) with a 4% match, along with a great selection of funds to choose from. I always contributed more than enough to obtain the company match, and typically increased my contribution rate by a percent each year.

The CEO who hired me was let go after I’d been there a year, but a new CEO was hired, one who had strong industry contacts that promised to translate into higher sales. A few years later, my wife left me. While she’d contributed to her IRA for the prior two decades, my combined IRA plus 401(k) balance exceeded hers, so I was required to transfer some of my retirement savings to her via a QDRO, or qualified domestic relations order. Our other investment and savings accounts were also affected.

The separation and divorce negotiations were difficult. Once it was all over, my finances were a bit of a wreck and my retirement savings had taken a hit. Around the same time, my employer was acquired by a large software company, and we were brought in as a division of the larger firm. This is when some magic happened for me. Over the course of three years, my pay increased substantially. I started maxing out my Fidelity 401(k) and refilling my emergency fund. My Vanguard IRA balance also continued to grow.

Meanwhile, a modest inheritance from my parents became part of my investment account. I left that money to grow, and haven’t yet needed those funds. Other than the divorce settlement QDRO, I never took any money out of my IRA or 401(k) during my career. In mid-2020, just after turning age 67 and after working 20 years in the engineering software business, I pulled the plug and retired. I rolled my Fidelity 401(k) into my IRA.  

I didn’t take Social Security until last summer, when I turned 70. While I waited to claim benefits, I spent from accumulated cash and took monthly draws from my IRA. Now that I’m receiving Social Security, I continue to make regular withdrawals from my IRA, with an eye to lessening the tax hit when I have to begin required minimum distributions in a few years. 

There are many potential pitfalls with IRAs and 401(k)s. I know multiple coworkers from my first job who spent their 401(k) proceeds, rather than rolling them over. I had a friend from the software company who borrowed from his 401(k), but then had trouble repaying the loan when he left the company. But these retirement accounts worked well for me. By contributing regularly over many decades and rolling over my retirement balances to my IRA whenever I changed jobs, I feel like I’m the poster child for how to make the most of tax-deferred accounts.

Jeff Bond moved to Raleigh in 1971 to attend North Carolina State University and never left. He retired in 2020 after 43 years in various engineering roles. Jeff’s the proud father of two sons and, in 2013, expanded his family with a new wife and two stepdaughters. Today, he’s “Grandpa” three times over. In retirement, Jeff works on home projects, volunteers, reads, gardens, and rides his bike or goes to the gym almost every day. Check out his previous articles.

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