The American Dream

Helping Participants Act like Entrepreneurs


By Charlie Epstein, CLU, ChFC, AIF

Mr. Epstein is the founder of The 401k Coach Program, which offers training for financial professionals. He is the author of the book, Paychecks for Life, which offers nine Principles for participants to turn their 401(k) plans into a secure retirement income.  He is a member of the Legg Mason Retirement Advisory Council.

James Truslow Adams coined the term ‘American Dream’ in 1931. While often associated with home ownership, the American Dream also refers to the opportunities many find in the United States. Plan participants, although working for employers, have the opportunity to start their own Paycheck Manufacturing Companies (PCM Cos.) with their 401(k)s. The first step in helping participants to act like the bosses of their PCM Cos. is to describe entrepreneurship and explain what entrepreneurs do.

Entrepreneurs organize, manage and assume the risks of a business. They take land, labor and capital and combine them in such a way that more value is created than the cost of those resources. An entrepreneur is one whose final product is worth more than the sum of its individual parts.

To me, an entrepreneur is a person who can figure out what products and services are needed and find the right people to make their vision become a reality. They also make more profit than they spend. An entrepreneur is a person who recognizes opportunities and seizes them.

Let’s look at an example of a typical entrepreneur: A bakery owner buys inexpensive ingredients, including flour, butter and spices. The person uses their knowledge and ingenuity to combine these simple components to create a wedding cake worth thousands of dollars. In this way, the baker makes a lot of profit through his or her resourcefulness.

Participants may be employees and work for employers. Their bosses use the employees’ skills in order to create more value than the money they are paying for labor. Some entrepreneurs create such successful companies and utilize the productivity of their employees so well that they are able to sell their enterprise and retire wealthy. In order for participants to achieve their desirement or successful retirement years, they need to do the same thing: fully and efficiently utilize their resources to create their Paycheck Manufacturing Companies.

For your plan sponsor participants, the first step in acting like entrepreneurs is hiring capable individuals. Their contribution dollars are the best employees imaginable. They work all day, every day and never complain. They don’t require health benefits, and participants won’t have to pay taxes on them just yet. Unfortunately, many participants only hire, or contribute, the bare minimum of essential employees. This is not enough! The government allows up to 16,500 employees to be hired each year, and if the participant is over age 50, he or she can hire as many as 22,000 hard-working, never-complaining employees per year. I know many business owners who wish they could hire just a handful of employees that act this way.

For some participants, it is difficult to contribute this much to their 401(k)s, but it is essential if they would like a profitable desirement. By helping participants act like entrepreneurs of their own Paycheck Manufacturing Companies, you can show them the true value of their 401(k)s.