WRITING SHORT: 35/50

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[Come summer heat, much of my blogging momentum melts away. Hence an experiment until Labor Day: fifty minimalist posts about whatever.]

Once upon a time, a well-respected lawyer left a large Boston law firm to open a small litigation practice of his own. He was a genial, generous boss. When he won a big case, he gave liberal year-end bonuses to all fourteen of his new employees, even the ones who weren’t lawyers.

But big trial wins are infrequent; there were occasional cash flow problems at the new firm. On several paydays he left early, ashamed or embarrassed; the young bookkeeper who did payroll would then explain everyone would be paid after the weekend because the deposit to cover salaries hadn’t yet cleared. Some non-lawyers were living paycheck to paycheck. However, in the end no one went hungry.

He was also generous with matching employee 401(k) contributions, up to 5%. In those days, the annual cap on such tax-deferred contributions was 15% of salary, but with his match, it came to 20%. All the lawyers had the full 15% withheld, and some others managed it, too.

Who regularly checks their 401(k) statement? At that firm, one lawyer did. He noticed his account had been without deposit activity for some time. The young bookkeeper explained that holding back 401(k) account deposits was the only way the firm could meet payroll just then, and the boss would make good on both the employee contributions and the firm’s as soon as he could.

Not investing employee-designated 401(k) contributions is a serious violation of federal law. All the lawyers knew it. Even the non-lawyers could recognize it as a kind of salary theft. Yet everyone held their tongues about this tricky situation. Reporting it might have put the firm out of business, the employees (lawyers included) out on the street. Mercifully, more money soon rolled in, so they could all breathe easy again.

I am reminded of this story because many aging people have cash flow problems too. They also closely monitor their retirement accounts. But not for deposit activity. It’s the taxable withdrawals — both the mandatory distributions and others for unforeseen expenses — that make them hold their breath. Talk about tricky situations: How long will the retirement account last? No federal law prohibits outliving one’s money. So there’s nobody to report it to. And no genial, generous boss, either — to make it come right in the end.

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