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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

#121

Post by pillowkusis »

temp246810 wrote: post #35

Even though I'm doing all the right things like maxing out 401k etc., I can't help but feel that I will regret it later. It feels like everyone grew up hearing the same thing (people are poor planners, people go broke in retirement) and now as adults have vowed that will never be them. The problem is that now everyone thinks this way - index funds are on the rise, people are saving into their 401k, I can't help but t…

I've been feeling the same way. Having millions of people and billions of dollars blindly dumped into index funds leaves me uneasy. Many view index funds as a "7% return machine". The conventional wisdom is "buy and hold", blindly, regardless of what the market does, what companies fail, or who you're investing in. Most 401k users probably couldn't name more than 10 stocks that their fund is comprised of. Stock markets assume people buy stocks because they believe in some fundemental value of the stock, and have thus done analysis to believe so. When markets are composed of people who don't adhere to this philosophy... I'm not sure what happens next. Having such a large mass of investors who are not thinking rationally about their investment seems like a recipe for disaster, but I'm no economist.

REITs, small-cap funds, international stocks, and perhaps commodities seem like the best choices if you're looking to diversify. The reality is if everyone's investment behavior precipitates a large collapse, pretty much no sane investment strategy is going to do well. Diversify, hedge your bets, and just stop worrying about it. That's the conclusion I've come to, anyway.

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

#122

Post by kevinh »

adventured wrote: post #117
hillz wrote: post #102

Earlier quoted context omitted.

I mean... He did lose the popular vote. So 'most' people didn't have an influence on the election. Or at least, the plurality of people.

Trump easily won the popular vote for the 48 states that aren't California and New York. Popular vote indeed. There's a very good reason the electoral college exists.

And if you take out a couple states, Clinton won the electoral college. What's your point? That we should ignore the votes of two of the largest states because they don't agree with you?

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

#123

Post by bogomipz »

DoodleBuggy wrote: post #47
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.

>" The fact is you pay ~16% of your paycheck into social security."

Not quite. This is actually split between the employee and the employer. With each contributing 6.2%.

https://www.ssa.gov/pubs/EN-05-10022.pdf

Also why are you admonishing the OP? He has every right to pessimistic about this current state of social security.

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

#124

Post by ryandrake »

briHass wrote: post #53
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…

One problem with the Roth IRA is the income phase out limits. If you're single, if you AGI is >117K, you can only contribute some percentage of the $5000 allowed for the Roth. If you're >132K, you can't contribute anything. For a married couple, those limits are 184K/194K. Granted, you can reduce your AGI by contributing to a 401K first, which allows you to take $18K off the top. I know this doesn't affect many, but…

Those are still pretty high limits, well above the median tech salary even in the Bay Area. If you're in "income phase out" territory you're probably not worried about your retirement.

The thing I don't like about Roth is that you're contributing with post-tax money during your prime working years--the time when your taxes are probably as high as they will ever be. Especially true as a tech worker where your salary plateaus in your 20s. I'd rather save pre-tax now, and then pay taxes later when I'm 60 and back in the lowest tax bracket.

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

#125

Post by forgottenpass »

hellogoodbyeeee wrote: post #31
squozzer wrote: post #5

Having a somewhat paranoid personality, I find myself wondering if auto-enroll and (especially) auto-escalation - which my job has - are designed with the employee's well-being in mind, or just a ploy to prop up the stock market?

Honestly, which do you think is most likely? 1) Your HR department is part of a nation-wide conspiracy to prop up stock market prices. 2) Your HR department is trying to help their employees be properly prepared for retirement.

3) HR don't give a fuck, and are just told to do the thing the business wants to do because it is incenivized to do so.

The benefit to the employees and ability for HR to feel positive about their position in the role are arbitrary. The employees could also suffer when business wants to do something that negatively impacts them, and HR can be used to carry that out too. e.g: Switching to a shittier health plan to save money.

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

#126

Post by jcdavis »

lintiness wrote: post #72
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/

Solely discussing stock valuations without also considering bond yields is a little misleading. With interest rates so low on a historical basis (albeit now possibly picking up), higher stock pricing is expected and isn't necessarily "overpriced"

A good recent discussion of this: http://brooklyninvestor.blogspot.com/2016/11/bonds-down-stoc...

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

#127

Post by bk_geek »

dmoy wrote: post #14
chiph wrote: post #3

With more money chasing after the same quantity of equities, I would have thought the market prices would have been going up. But they've been essentially flat over the past year. Even though firms have been buying back their stock. There must be another reason why they've been stagnant.

S&P 500 is up 20% in 2016... not sure what you're talking about.

S&P 500 gained approx 9.5% in 2016

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

#128

Post by jandrewrogers »

DoodleBuggy wrote: post #47
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.

It is not your money, it is a tax on income like any other. The Supreme Court established in 1960 (Flemming v Nestor) that contributions to Social Security are not your property and the government has no obligation to ever pay you benefits regardless of contribution. People have had this entitlement revoked in practice, though the targeting tends to be selective for out-groups and not a substantial fraction of the population.

The government strongly encourages belief in the myth that Social Security is something other than a welfare tax with no implied obligation to the taxpayer because that notion makes the tax much more palatable than the reality.

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

#129

Post by DoodleBuggy »

lintiness wrote: post #72
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/

Agreed, but bullish sentiment remains strong and most people are oblivious to valuation metrics.

As long as people don't panic sell in the next crash, they should be able to ride it out and break even in a decade or two. Unless we end up like Japan, that is.

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

#130

Post by NoGravitas »

torpfactory wrote: post #114
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 truly believe that whatever people think about social security not being around when they retire, that it will be around at some level. We will almost certainly reduce benefits and/or increase retirement age. What is the alternative? There are far too many people who really can't save for retirement due to low wages for a significant part of the population. We aren't going to let these people live in abject poverty…

> There are far too many people who really can't save for retirement due to low wages for a significant part of the population. We aren't going to let these people live in abject poverty, and they aren't going to have any money to cough up to support themselves.

The history of the US in the past several decades suggests that yes, we absolutely are going to let these people live in abject poverty. Unfortunately.

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