SAJ-99
Well-known member
I find it encouraging that you think you will retire.
I need you and your cohorts to keep working so you can buy my overpriced house when I decide to downsize into a retirement community in Florida or somewhere.
Future of 401ks
- Thread starter SAJ-99
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I need you and your cohorts to keep working so you can buy my overpriced house when I decide to downsize into a retirement community in Florida or somewhere.
Irrelevant
Well-known member
Our new hires make that same argument. Then go to Europe. I've tried to give them the benefit of the doubt but they're so friggin spoiled it's sickening
SD_Prairie_Goat
Well-known member
I find it encouraging that you think you will retire.
at that point I might be retiring in a third world country so I can afford to die in peace instead of broke hahaha! Why else did I learn Spanish if not to save money and retire in Venezuela?
Pucky Freak
Well-known member
401(k) was marketed to America 45 years ago as the successor of employer-sponsored pensions. Put the risk on the individual, give them agency, and allow businesses to be more nimble. How has it panned out over time?
Top 20% of earners: Paid fewer taxes, and became much wealthier. The top 5% of earners became absurdly wealthy.
Bottom 50% of earners: Did not meaningfully participate. Relying on family, SS benefits, and meager savings to survive. Perhaps the two biggest factors here are lack of money to invest, and poor financial literacy.
All other earners: Mixed bag. Enough money to invest, but poor financial literacy leads diverging outcomes. Financially literate folks attain modest savings, while the rest buy high and sell low, cash out and take a tax hit, making insufficient contributions, or use their nest egg as a rainy day fund.
Government bottom line: Losing taxes to the high income bracket folks who didnāt need the tax shelter to begin with.
Investment firms: Profited immensely until exposure and reforms forced their hands on exorbitant fees.
It turns out that pensions were a good thing for folks with modest incomes and poor financial literacy.
Top 20% of earners: Paid fewer taxes, and became much wealthier. The top 5% of earners became absurdly wealthy.
Bottom 50% of earners: Did not meaningfully participate. Relying on family, SS benefits, and meager savings to survive. Perhaps the two biggest factors here are lack of money to invest, and poor financial literacy.
All other earners: Mixed bag. Enough money to invest, but poor financial literacy leads diverging outcomes. Financially literate folks attain modest savings, while the rest buy high and sell low, cash out and take a tax hit, making insufficient contributions, or use their nest egg as a rainy day fund.
Government bottom line: Losing taxes to the high income bracket folks who didnāt need the tax shelter to begin with.
Investment firms: Profited immensely until exposure and reforms forced their hands on exorbitant fees.
It turns out that pensions were a good thing for folks with modest incomes and poor financial literacy.
Pucky Freak
Well-known member
Itās time to take the top 20% off the governmentās teat. Whether thatās ending their participation in tax-advantaged retirement savings plans, a wealth tax, or reforming the tax code, at the end of the day they need to pay. Why are we sending SS āsafety netā checks to millionaires?
A common chorus from most in this group is that government mismanages funds, so why pay more? Two separate issues.
I think the age of defined-benefit retirement plans is over. Itās up to us to educate our kids on how to bury enough acorns to make it through the winter.
A common chorus from most in this group is that government mismanages funds, so why pay more? Two separate issues.
I think the age of defined-benefit retirement plans is over. Itās up to us to educate our kids on how to bury enough acorns to make it through the winter.
I agree with this argument but also have to add access to the funds is an issue, especially for the bottom portion. I personally know multiple people who cash that thing out every time they change jobs for a truck, boat, etc. Maybe people need to be protected from themselves, too.
Pucky Freak
Well-known member
By whom?
D
Deleted member 28227
Guest
Barry Ramsey
The rule in place right now is you canāt access it before 59 1/2 without penalty, just make it no access before whatever age you decide to tack onto it. Most pension plans didnāt have early access
Mallardsx2
Well-known member
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- Apr 4, 2015
- Messages
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This is a VERY accurate statement. There is a lot of people robbing/pinching/borrowing from their 401K's right now. It's really unreal how many people take it ALL out early with penalties.
Example:
I have a friend in PA (45 years old) who emptied ALL of his 401K so he could buy the adjoining 25-acre tract of land just so his neighbor couldn't hunt deer there. lol The level of financial stupidity nationwide is baffling.
Mallardsx2
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Not entirely true.
There are in fact ways around this regarding the 401K's (rule of 55) but with the ROTH 401K you will still be paying taxes via pro-rata rule until age 59-1/2. So, it is best to not touch that until 59-1/2 if you can help it.
D
Deleted member 28227
Guest
Canāt speak to your company, but my 401k from my first 5 years working out of college was a drop in the bucket. I now put in more each year than those 5 combined.
Thereās always an exception to every rule
That rule (55) doesnāt seem to get abused like early withdrawals, just based on the interactions Iāve had with advisors and asking about using it.
Pucky Freak
Well-known member
FWIW I think nearly everyone has the āwhatās mine is mineā mentality nowadays. I can resign, wipe out my pension in 1 day, and then get rehired doing the same gig tomorrow. I can borrow money from my pension. I can also obtain a private loan using my pension as collateral. I had a coworker making six figures who resigned after 24 years w/ the state, immediately cashed out their pension and had $0 left after paying off consumer debt. There are ways to make raiding a retirement fund more difficult, but a determined person will find a way around it. My guess is that far more people than anticipated didnāt even blink at the 10% penalty. Maybe it needs to be 50%.
D
Deleted member 48080
Guest
Or, a lot of lower income people have zero faith in system/future. When you watch others get railroaded by life over and over again, it becomes very tempting to enjoy what you can, when you can.
I would put my money on you are absolutely right but as Ron White saysā¦
Irrelevant
Well-known member
Except for when we were saving for our second house (2 years) and the year my son was born. It's always been a high priority item for me. I don't like work. So the faster I can retire the better. We lived very poor for a decade or so out of school.Canāt speak to your company, but my 401k from my first 5 years working out of college was a drop in the bucket. I now put in more each year than those 5 combined.
npaden
Well-known member
Not sure that's true either. I audit utility companies and many of them still have defined benefit plans. I would say the average cost for those plans right now is about 30% of salaries.
I think if the same company put 30% in your 401k for you, you would be better off.
I do think the poor financial literacy is an issue as you are right about buying high and selling low. The lifestyle and target date mutual funds are helping that a lot though.
BuzzH
Well-known member
Should have never gotten away from pensions. No question it's also an income problem.
The real shock is that all these things favor the top wage earners while leaving a majority in the dust. It's almost as if those with the most gold are making the rules or something.
npaden
Well-known member
I think even if pensions were popular still, the same people would be making the same mistakes with them. The days of people working 30+ years at the same company earning a pension are over. Even my clients that have those gold plated pension plans and post retirement health insurance benefits have a hard time getting people to stick around. The 22 year old getting paid $40,000 with a $30,000 benefit package is gone the second they get that first offer for a job paying $50,000 with a $5,000 benefit package.
