Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

bloomberg.com

Post reply on HN
Print view View original

71–80 of 479 posts

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

#71

Post by JumpCrisscross »

SEJeff wrote: post #45
pwthornton wrote: post #28

Earlier quoted context omitted.

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)…

> If you want to correct someone, please correct them properly. You buy shares in instruments traded on Exchanges, which make up the "Stock Market"

Shares are instruments [1]. (You say this later, but nobody buys "shares in instruments").

Exchanges, together with ECNs, OTC markets, broker-dealers, other market makers, buyers, sellers, arbitrageurs, investment banks, et cetera make up the stock market.

[1] https://en.m.wikipedia.org/wiki/Financial_instrument

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

#72

Post by lintiness »

sgustard wrote: post #36

More money enters when the market is hot. I expect the contribution percentage closely mirrors the price of the S&P. The graph doesn't show the 2007-8 crash but I'd also expect contributions dropped at that time, also providing a depressed baseline for the current gain. Of course, people would have been better served by contributing after the drop, and one could also be nervous about record dollars chasing the market…

along these lines, note how many news stories etc are currently touting the power of stock indices and index investing. given a shiller pe of ~28, i'd say most are in for a very rude awakening (again and forever).

http://www.multpl.com/shiller-pe/

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

#73

Post by MikeTV »

klodolph wrote: post #37
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…

It's not quite that simple, it really depends on what you suspect your tax rates are going to be. Roth contributions are essentially taxed at your marginal rate right now, but traditional 401k withdrawals are taxed like income when you make the withdrawal. There are lots of situations where you would want to lower your tax burden now instead of go for the Roth. Note that you can also have a Roth 401k or a traditional…

Worth noting that the limits are different between Roth IRAs and Traditional IRAs, though, if you have a retirement plan at work. A married couple making between 119k and 186k wouldn't get any deduction for the trad IRA, so might as well go with the Roth even if they think their income will be much lower in the future.

The Roth also lets you pull out contributions later without penalty, which is a nice worry-free safety net in case the emergency fund runs out.

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

#74

Post by wang_li »

JumpCrisscross wrote: post #56
DoodleBuggy wrote: post #47

Earlier quoted context omitted.

> "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.

> It is not an entitlement, it's your money That's not how social security works. Every dollar you pay in flies out to fund promises made in years past. "Your" social security money needs to be earned by our children.

The Social Security Trust fund generally runs a surplus (as recently as 2014 it added $25 billion.) However it's projected that around 2030-2034 the number of recipients will be drawing more than is being paid in. At that point your statement will become more correct than it currently is.

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

#75

Post by chrisabrams »

fortytw2 wrote: post #54
DoodleBuggy wrote: post #47

Earlier quoted context omitted.

> "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.

If it was actually your money, paying into it would be optional.

Bingo!

This is the best attitude I have seen in the whole thread. Social Security is an authoritarian play, or a power play.

Another way to look at it: if every single US tax payer had to manually pay their taxes, instead of them being auto-drawn from their respective W2 employer, you'd see more people asking the question "who's money is this really?"

This is why the fair tax or similar plans will never pass. The power to silently tax people is too good for big brother.

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

#76

Post by 40acres »

jeremy_k wrote: post #63
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…

Everyone here is commenting on the Roth income limits. Look up what a backdoor Roth contribution is. Basically avoid having a tIRA by keeping all your pre-tax money in a 401k and then you can contribute to a Roth IRA every year. The only problem with this is if your 401k has horrible funds. I'm luckily in that my company recently added Vanguard funds to our 401k funds and I switched nearly all of my money to those.

How often would one need to use a backdoor Roth contribution? Seems like something you would need to execute every year.

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

#77

Post by ghaff »

koolba wrote: post #15
vinhboy wrote: post #6

Say what you will about government incompetence, but the idea of tying things like my retirement and healthcare to my employer just sounds terrible. Also, auto-enrolling people into 401K sounds kinda like... ya know... social security.

> Also, auto-enrolling people into 401K sounds kinda like... ya know... social security. Companies auto enroll people into 401(k) programs because of participation requirements. For "highly paid employees" (i.e. executives) to be allowed to contribute to a 401(k), there requires a minimum level of participation from the rest of the workforce at the company. The easiest way to do so is to auto enroll people on day one…

It may be true that companies have self-interested reasons to auto enroll people. However, as was being discussed the other day in a different context, defaults can also be a pretty powerful lever for encouraging people to make the "right" choice, where right = some policy outcome that is generally considered positive. Default 401-K enrollment at some level has been advocated by some economists like Richard Thaler as a way of improving the overall savings rate.

The argument boils down to that you're going to have a default anyway, even if it's zero. So why not make the default a value that's is at least closer to the optimum.

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

#78

Post by jacalata »

fortytw2 wrote: post #54
DoodleBuggy wrote: post #47

Earlier quoted context omitted.

> "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.

If it was actually your money, paying into it would be optional.

Not necessarily. The Australian superannuation program has compulsory contributions but the money goes into an account in your own name.

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

#79

Post by guelo »

401k is such a scam, you get a handful of high fee funds to invest in. Wall Street thieves billions of dollars, all sanctioned by the government and encouraged by the financial advise industry.

Employees should only contribute to a 401k up to any employer match. Beyond that put your money in an IRA.

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

#80

Post by tingletech »

JumpCrisscross wrote: post #56
DoodleBuggy wrote: post #47

Earlier quoted context omitted.

> "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.

> It is not an entitlement, it's your money That's not how social security works. Every dollar you pay in flies out to fund promises made in years past. "Your" social security money needs to be earned by our children.

That's why we need immigration policies that let us keep enough working age people in the country
Post reply on HN