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Americans Are Putting Billions More Than Usual in Their 401(k)s

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Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#41

Post by sikim »

chimeracoder wrote: post #27
sikim wrote: post #20

I wonder what percentage of 401k contributors has an IRA. General rule of thumb is to contribute enough to 401k to get maximum company matching and max out your Roth IRA contribution first. IRA is generally preferred because you can choose your own fund (e.g. Vanguard) and has more flexibility in certain situations. By having both pre-tax (401k) and post-tax (Roth IRA), you would be also diversifying your tax liabili…

> By having both pre-tax (401k) and post-tax (Roth IRA), you would be also diversifying your tax liability in your retirement. The way your comment is written, it implies that 401(k)s are necessarily pre-tax and IRAs are necessarily post-tax. Both 401(k)s and IRAs come in Traditional and Roth forms, so you could also use pre-tax money for contributing to your IRA, and post-tax money for contributing to your 401(k), o…

Yes, that is correct. I generally prefer to have my 401k all pre-tax (traditional) and my IRA post-tax (roth) to make it easier to manage. Also, this would open doors for backdoor roth IRA contribution once you go over the government's income limit for contributing to IRA, but this is a whole different topic.

Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#42

Post by justinph »

callinyouin wrote: post #4

I'm not planning on Social Security being around by the time I'm old enough to tap into it, and I'm also not planning on having any kids to bail me out when I go senile, so yeah I'm putting a lot into my 401k. I think a lot of people my age (turning 30 next week) are feeling the same way, so I wonder if it's younger workers driving this trend.

I read this a lot. Why do you expect this to be the case?

Social Security may become unable to pay the benefits that you're expecting at some point because the input from workers will not be enough to pay those benefits. But that doesn't mean it will pay nothing. It will just pay less. You'll still get some payments.

Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#44

Post by Zaheer »

sikim wrote: post #20

I wonder what percentage of 401k contributors has an IRA. General rule of thumb is to contribute enough to 401k to get maximum company matching and max out your Roth IRA contribution first. IRA is generally preferred because you can choose your own fund (e.g. Vanguard) and has more flexibility in certain situations. By having both pre-tax (401k) and post-tax (Roth IRA), you would be also diversifying your tax liabili…

Note that Roth IRA has an Income Limit. Ex. You can't contribute at all as a single filer if you make more than $131k.

https://en.wikipedia.org/wiki/Roth_IRA#Income_limits

Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#45

Post by SEJeff »

pwthornton wrote: post #28
cjkalsdf wrote: post #18

Earlier quoted context omitted.

You think the stock market will be around when you are old enough to need your 401k? I max my contributions but I have no faith they won't be wiped out in some future crash.

You buy shares in the stock market, not dollars, so a crash shouldn't hamper your ability to retire, unless you want to retire during the crash itself (although diversity of assets would help with this). The stock market recovered years ago from the Great Depression and is doing really well again.

If you want to correct someone, please correct them properly. You buy shares or instruments traded on Exchanges, which make up the "Stock Market". However, you don't always buy on Exchanges (OTC/Over the Counter Trading). Those instruments can be equities (shares of a company) aka stocks, securities, futures, options, etc.

The Dow Jones Industrial Average (a common benchmark index such as the Standard and Poor's 500) is literally at an all time high and is on the cusp of 20,000: https://www.google.com/finance?cid=983582

Edit: Changes "shares in instruments to shares or instruments". It was a bit ambiguous and I was originally trying to make it more obvious that shares are considered instruments (along with several other things traded).

Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#46

Post by jameskegel »

justinph wrote: post #42
callinyouin wrote: post #4

I'm not planning on Social Security being around by the time I'm old enough to tap into it, and I'm also not planning on having any kids to bail me out when I go senile, so yeah I'm putting a lot into my 401k. I think a lot of people my age (turning 30 next week) are feeling the same way, so I wonder if it's younger workers driving this trend.

I read this a lot. Why do you expect this to be the case? Social Security may become unable to pay the benefits that you're expecting at some point because the input from workers will not be enough to pay those benefits. But that doesn't mean it will pay nothing. It will just pay less. You'll still get some payments.

How do you support this assertion?

Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#47

Post by DoodleBuggy »

callinyouin wrote: post #4

I'm not planning on Social Security being around by the time I'm old enough to tap into it, and I'm also not planning on having any kids to bail me out when I go senile, so yeah I'm putting a lot into my 401k. I think a lot of people my age (turning 30 next week) are feeling the same way, so I wonder if it's younger workers driving this trend.

> "I'm not planning on Social Security being around by the time I'm old enough to tap into it"

You need to change that attitude or your complacency will allow politicians to take it from you. The fact is you pay ~16% of your paycheck into social security and medicare, it is designed to be like a pension. It is not an entitlement, it's your money.

Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#48

Post by RobertoG »

callinyouin wrote: post #4

I'm not planning on Social Security being around by the time I'm old enough to tap into it, and I'm also not planning on having any kids to bail me out when I go senile, so yeah I'm putting a lot into my 401k. I think a lot of people my age (turning 30 next week) are feeling the same way, so I wonder if it's younger workers driving this trend.

Maybe a little out of scope, but, is it not the important issue if the society we live when we retire is richer or poorer than the society today?

I mean, if we live in a society, for instance, three times richer (per capita) than today, it would be very strange that old people will have a hard time.

In the other hand, if it's a poorer society, even people with savings are probably to have a hard retirement.

Re: Americans Are Putting Billions More Than Usual in Their 401(k)s

#49

Post by thraway2016 »

pwthornton wrote: post #28
cjkalsdf wrote: post #18

Earlier quoted context omitted.

You think the stock market will be around when you are old enough to need your 401k? I max my contributions but I have no faith they won't be wiped out in some future crash.

You buy shares in the stock market, not dollars, so a crash shouldn't hamper your ability to retire, unless you want to retire during the crash itself (although diversity of assets would help with this). The stock market recovered years ago from the Great Depression and is doing really well again.

I'm not sure if "crash" is the problem. Crashes happen in markets, it's part of the business cycle.

OP is discussing a 30+ year time horizon, though. I can think of a few potential things that would precipitate not just a crash, but a long-term economic malaise:

- Climate change - Political/social unrest (extrapolate Brexit, Trump, etc) - Mass unemployment caused by automation (you can't "retrain" 5MM 50yo truck drivers) - Empire collapse (has happened with every single empire in history - what makes the U.S. exempt?) - Nuclear exchange (tensions with Russia steadily increasing) - Grey goo / UFAI (I know, crazy, but still, 30+ year time horizon)

While I'm sympathetic to the view that alarmist "the crash is coming" thinking is likely incorrect, whenever one discusses decades-long time horizon in an era of accelerating technology and political uncertainty, I don't think it's unreasonable to suggest that the VIX is not considering tail risk of unlikely, but highly impactful events.

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