TIAA chief urges Gen Z to start 401(k) savings with the first paycheck

TIAA President and CEO Thasunda Brown Duckett is urging young workers to put retirement savings ahead of discretionary spending as soon as they enter the workforce. In an interview on Fortune’s Titans and Disruptors of Industry podcast, Duckett said early contributions can matter because money invested sooner has more time to compound.

Duckett told Fortune she began that habit after graduating from the University of Houston in 1996, when she took her first job at Fannie Mae. She said her starting salary was $26,000 and that she contributed the maximum amount allowed to her 401(k) plan right away.

Duckett said she has continued to make full use of 401(k) savings through later roles, including as CEO of consumer banking at Chase in 2016 and during her five years leading TIAA. Fortune described her as a multimillionaire, a two-time chief executive and one of 11 Black CEOs running Fortune 500 companies.

Advice built around payroll deductions

Duckett told Fortune that young employees should make retirement contributions before the paycheck reaches their bank account. Her reasoning: once workers receive the money, they are likely to spend it.

She also pointed to employer matching contributions as a benefit workers should not pass up, according to Fortune. The publication reported that many employers offering 401(k) plans provide a match, often up to 6%, and that contributions can reduce taxes by hundreds or thousands of dollars a year.

Duckett said retirement saving should come before broader investing, according to Fortune. After funding retirement accounts and covering required expenses, she advised workers to build a rainy-day fund for routine financial shocks, then consider other assets such as Roth IRAs, stocks and high-yield savings accounts.

On the podcast, Duckett said tax rules for retirement accounts help invested dollars work for longer. She described investing as a habit that can strengthen over time once workers begin setting money aside consistently.

A family lesson on missed compounding

Duckett told Fortune her views on retirement savings were shaped by her father’s experience. After returning home from college, she reviewed financial paperwork for her father, Otis Brown, whom Fortune described as a blue-collar worker who worked in a warehouse and drove trucks.

Duckett said her family had experienced financial insecurity and that her father’s pension would not provide enough for a comfortable retirement. Although he had access to a 401(k), she told Fortune he had not contributed to it for more than 30 years, missing decades of potential compounding.

After they discussed the issue, Duckett said her father began contributing the maximum amount to his 401(k), even though money remained tight. She told Fortune he later saw the benefit but regretted not knowing earlier that the retirement plan could have helped him.

Duckett also struck an optimistic note about younger workers’ ability to shape their financial future, according to Fortune. She said the next generation should recognize that it can still make decisions now that affect long-term security.

This story draws on original reporting from Fortune.