Over the years I have been fortunate to work with a lot of computer programmers, I say fortunate because for the most part, we tend to be on the same wavelength (I write, html, css and php as a hobby sad I know) which makes work more pleasurable and secondly they generally always get the math behind what we are discussing the first time.
Computer programmers are generally pretty well paid especially once they have established and proved their skill set (it’s an industry where what you can do is more important than the qualifications you hold) yet it has been my observation (no stats just an observation) that based on age and salary they are often behind where they should be in terms of pension planning.
There is no science behind this article at all it is just sweeping observations from my experience of working with programmers on their retirement and other financial planning needs. So here are the 5 reasons that I think they fall behind where they would like to be in the retirement planning stakes.
Counting down from least to most significant;
5 – They are going to make it big.
A great number of the most high profile self-made millionaires and even billionaires in last decade or so have essentially come from computer programming, Facebook, twitter, angry birds, Instagram etc. etc. So it is not perhaps unreasonable that a programmer could feel all they need is that one big idea or one of the ideas they have already had to catch on.
Programmers generally love what they do, and therefore they generally have a side project detached from their actual employment, that they work on in their spare time. The barriers to entry in markets such as online portals and smartphone apps are pretty low in terms of costs – the hard bit is the coding knowledge which perhaps unsurprisingly professional computer programmers generally already have.
Given this belief particularly in their younger years that they are going to ‘make it big’ it’s perhaps not surprising that little gets invested in pensions as they spend cash on promoting and furthering their side projects.
4 – Obsessive Puzzle Solvers / Highly Focussed
From my observations, it seems to be a great coder you need to have an element of ‘obsessive puzzle-solving’ in your personality. When you talk to programmers about their work a recurring theme seems to be the satisfaction that comes from solving a complex and usually irritating problem in their code.
This obsessive problem-solving nature often results in long periods when the programmer is highly focussed and blocks out all but the most necessary of distractions. For many this happens early in a project when they have been brought in to try and fix something – early in a project often means early in a job – when most employees would be sorting out their company benefits like pensions.
So unless they have an employer who includes pensions joining as part of the signing on process, it can often get ignored for quite some time.
3 – Time Poor / Like to Study Every Detail
Computer Programming can be a very time-consuming job and hobby, many programmers work from home and clock up a huge number of hours far more than their employer realises. A programmer can easily spend a whole day solving a problem related to a tiny bit of code – because most of them love the problem solving and some of them worry the office won’t realise what went into that little bit of code they put in extra time to show they are producing enough to be worthy of their place in the team.
Equally, when deadlines approach and ‘crunch’ time arrives for many programmers the outside world simply doesn’t exist.
This lifestyle results in periods, often very long periods where programmers are ‘time poor’ i.e. there just are not enough hours in the day. Combining this with a personality type that likes to study the minute detail of everything they do and understand everything means that Programmers are often the victims of inaction. Instead of trusting in their advisers (obviously, trust has to be earned) they will often leave the ‘pension stuff’ sitting on a desk for long periods until they can ‘look at it in detail’. This inaction can often result in lost contributions from themselves or employers, or higher charges or poor performance because they didn’t make adjustments when told to.
2 – Young Companies
The main cost in setting up a programming studio is gaining the knowledge to code in the first place. Other than that the start-up costs of a new company can be quite small, home computers with programmers working from home can be all that is needed to get many projects going.
A seed of an idea is often the main thing that a new company needs, to get going. Young companies like this tend to not offer benefits such as pensions as the owners and directors are generally programming too and points 5, 4 and 3 above result in them not wanting to spend any time on this and instead offering a slightly higher salary to compensate. (the employee supposedly then takes care of their provision) And as points 4 & 3 generally apply to the employed programmers signing on they don’t have a pension review when they start either they just spend the extra cash.
1 – Project Is King
I would encourage anyone interested in coding to do so it is a real career and you will have good employment prospects for life if you are prepared to keep your knowledge up to date, but you will not have the traditional ‘job for life’.
Computer Programmers are not all the same they specialise in different languages and different aspects of any particular language. This means that there will be times on a project when their skills are extremely important and times when they are barely needed at all. Keeping the right team together for a project is a constant struggle for management at a programming studio. They face the constant challenge of either keeping good people busy until they are needed in case they get poached on to something more interesting/challenging for them right now or constantly hiring and firing as the project requires.
This environment means that while programmers are rarely out of work unless they choose to be they also never really see themselves as staying put for the next 30 years, so they don’t pay much attention to pension options. So this either results in not joining the scheme at all and having no provision or having half a dozen separate pension schemes from various employers and projects by the time they’re in their early thirties.
Both these scenarios lead to bad outcomes, not having any provision at all being the worst. The younger you start your pension the less you have to pay into it to get the result you want – due to compounding! Having half a dozen small pension pots rather than one more substantial pot leads to higher pension charges (generally) and thus a smaller pension.
So when a programmer changes jobs they should make time to have their retirement options and benefits package reviewed, if they want to have a decent retirement.
Obviously, everything in this article is just my opinion so feel free to disagree with me or suggest other reasons in the comments below.