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That 401(k) is too good a deal to pass up


JEANETTE ENGEL is trying to give away free money. But she has few takers.

Ms. Engel is director of compensation and retirement for PRC Inc., a unit of Towson-based Black & Decker Corp., and she's worried because 40 percent of the company's employees haven't enrolled in its 401(k) plan.

The company matches each dollar an employee invests up to $100, then 50 cents on the dollar up to 3 percent of one's salary. Thereafter, PRC kicks in 25 cents for up to 6 percent. But Ms. Engel says many of her co-workers aren't buying. The problem, as she sees it, is they'd rather spend than save.

"People have got to have that car phone or the VCR," says Ms. Engel, who oversees PRC's $200 million 401(k) plan. "They are not thinking of the future. Once they learn the benefits the company gives they are crazy not to play the game."

Financial plan managers such as Ms. Engel have become so exasperated with savings habits that they have made a hobby of digging up statistics so shocking that even the biggest spendthrift could be persuaded to start pumping money into a 401(k) plan.

Consider the following:

* It will take $1 million in savings to maintain the purchasing power of a $49,000 income over 25 years, assuming 4 percent inflation.

* Forty percent of the nation's workers aren't saving for retirement, and about one-third of Americans have saved less than $10,000 for retirement.

* In 35 years, the number of people age 65 and older will more than double, to 70 million.

* At the same time, there will be two workers paying taxes to support one retiree, down from about three workers.

* By 2029, the Social Security Trust Fund will face bankruptcy unless Washington mends it.

* People should expect to live at least 20 years past age 65.

James S. Riepe, managing director of T. Rowe Price Associates, offers another statistic: The first class of the nation's 76 million baby boomers will turn 50 next year, and more than half expect to retire between the ages of 56 and 65.

"One of the ironies that emerges is that Americans express a relatively high degree of confidence concerning their retirement expectations, yet many are not taking the necessary steps to fulfill those expectations," he says.

So, it's easy to see why baby boomers are the driving force in the "retirement crisis," as Mr. Riepe calls it.

"This is a very big bubble moving through the universe," he says.

Baby boomers are people born from 1946 to 1964, and they have been a powerful consuming force. They've sent housing prices skyward, have made Mercedes and BMW household names, and have kept the cash registers humming at businesses from gourmet coffee bars to computer stores.

It's the baby boomers who will not only crush Social Security by their sheer numbers, but also suffer in their golden years because of radically different economics, experts say.

"Today's retirees have benefited from a huge expansion of the Social Security system, a large expansion of the private retirement benefit system an extended bull market in stocks, and most importantly, rapid economic growth that translated into great growth in wages," Mr. Riepe says. "Baby boomers, on the other hand, are likely to have none of these advantages."

That's why Ms. Engel is trying to coax her fellow employees to start saving -- and she's going to extremes. In November, she's planning an all-out 401(k) enrollment blitz to encourage as many of PRC's 5,500 employees to sign up. She plans to hold drawings for prizes -- perhaps give away even a trip -- for those who start saving, or increase their contribution to the plan. She's holding meetings to answer questions, distributing a monthly newsletter that talks about why they should save. And she's even lined up employees to talk about why they are savers.

"We are starting to saturate their minds with it," she said.

Ms. Engel, a bright 30-year-old who is quick with answers, sounds a bit like a preacher at the pulpit when she talks about savings.

"I'm a born-again saver," she says.

She wasn't always so gung-ho. Before taking a job at PRC in 1991 as a compensation analyst, she worked at Atlantic Research Corp. She began saving when she was 22, after a boss told her she had better start. But she was spooked by the stock market's crash in 1987, and she pulled out her money.

"It freaked me out," she said.

She was intimidated by the risk, and she didn't have a "clue" about investing.

"When I was in the supermarket, I'd see Money magazine and I'd be too afraid to look at it. Now I understand it. I feel so much better with what I'm doing," says Ms. Engel, who saves more than 8 percent of her annual salary.

There's another statistic that's worth noting. It's grim, but at least it's funny. More young Americans believe in UFOs than believe they will receive Social Security benefits.

Ms. Engel, too, worries that Social Security will be drained by the time she retires.

"I want to retire, too," she says. "But I have this fear that I'm not going to be able to do it. Is the money going to be there for me?"

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