Americans Are Putting Billions More Than Usual in Their 401(k)s • Hacker News Board

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

#191

Post by brewdad » Thu, Jan 05, 2017, 7:00 PM UTC

ryandrake wrote: post #124

briHass wrote: post #53

Earlier quoted context omitted.

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 p…

My issue with the Roth is that I don't trust the rules to remain the same in the future. I pay taxes now, before the money goes in, with the promise of tax-free withdrawals. I fully expect that money to become taxable on the back-end at some future time. It might be a lower rate (like capital gains today) or be income-based, but that pot of $ will be too tempting to ignore, I fear.

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

#192

Post by harryh » Thu, Jan 05, 2017, 7:01 PM UTC

dlp211 wrote: post #105

Frondo wrote: post #86

Earlier quoted context omitted.

I thought that way in my early- to mid-20s. I read lots of thoughtful articles about how SS was broke, wouldn't last, etc. As I got a little older, I started reading more about the history of SS, how it's always needed various adjustments over time, how people have always said it's going broke, it's unsustainable, etc. I realized that, for most of its history, the people who have said those things are actually more l…

To pile on to this. Even is SS makes no changes whatsoever, they can still pay out ~75% of the benefits starting in the late 2020's or early 2030's and all the way through the 2080's or 2090's based on the SS Trustee report. SS is going to be around unless we choose to elect officials that dismantle it. The fear mongering and apathy needs to stop.

It's worth noting that if there are benefit cuts of 25% that it's unlikely that each individual will see a 25% cut. It's more likely (in my opinion at least) that we'll see some sort of means testing where seniors with other income (from 401Ks, private pensions, other savings) see their benefits cut much more than 25% while those with low incomes retain their full benefits.

So if you are saving a lot it could, ironically, be a self fulfilling prophecy that you get no social security.

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

#193

Post by awinder » Thu, Jan 05, 2017, 7:02 PM UTC

rpwilcox wrote: post #145

kasperni wrote: post #51

Anyone else around here that does not have a pension account? On the basis that technology will have changed the economic system (for good or worse) in such fundamental ways so we either have greatly expanded life span, "free" handouts such as basic income, or major financial busts that have wiped out most pension savers.

I would ask the inverse: anyone around here have a pension account? When I joined my current company I was given an option to join the pension (maybe the last year it was offered to new people??). I didn't take it for a couple reasons: 1. figured I probably wouldn't be here for 30 years (!!!!) 2. Stories of rampant pension mismanagement scare me off. (Reasonably sure it wouldn't happen with my employer, but...)

Just to clarify on #2, it doesn't even have to really be in your employer's control. One of the biggest sales targets of mortgage-backed securities prior to 2008 were pension plans, they were AAA-rated securities.

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

#194

Post by cmurf » Thu, Jan 05, 2017, 7:03 PM UTC

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.

That's amusing. I'm 45 and said the same thing when I was in my mid-20's. And now I think it's just naive. The most docile 60 year olds I know become positively vitriolic at the idea of even the age of benefit payout being changed by 5 years. If Social Security were just done away with, I guarantee you the violent revolution they'd be considering wouldn't involve clever devices that take people's heads off cleanly, quickly and painlessly like the French did. Vlad the Impaler would be seen as a massage therapist in comparison.

So if Social Security (and don't forget Medicare it's part of the same FICA taxation) were to go away, it definitely means some nasty calamity happened first, like Yellowstone or a meteor just blew up half the country, in which case we've got other problems.

The thing to be concerned about is privatizing it. That's a con game to dump a shit ton of money into the stock market, with the ensuing distortion inflating the stock prices of the very wealthy. It's about helping them. It doesn't do squat to help the people who will depend on Social Security. They will not make more money. And just like with getting rid of it, there's no way it's tenable to tolerate the inevitable short term loss of asset value with recessions. We can't have retirees experiencing 5% let alone 20% loss of income for 1 month let alone 1 year let alone 5-8 years for a recovery. Old people would sooner pick up axes and make you shoot them, because shooting your grandma in the head is kinder than this Republican privatization of Social Security nonsense. Grandma is not going to go back to dumpster diving and living under a bridge again like the 1930's.

And you've got the same financial concern with an unbalanced 401K - that could leave you in a lurch the same way a privatized Social Security plan can. So take the risks in that 401k while you're young, but at some point probably in your 50's, you'll want to start moving it to inflation indexed treasuries.

Young people right now are more likely to be savers, because of 2007/2008. They saw what it did to the unprepared, so they know that sort of thing can happen. Gen X and the Baby Boomers didn't have anything nearly that scary.

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

#195

Post by pwthornton » Thu, Jan 05, 2017, 7:03 PM UTC

thesimpsons1022 wrote: post #146

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.

it took 30 years for people's stocks to recover that bought them right before the great depression.

The very nature of saving in a 401k is that you never at one time put in a high percentage of your balance into it. The max individual contribution is $18,000 a year.

Let's say you have been doing around $10,000 the first 10 years of your career and the economy tanks. You now have 30-40 years until retirement, and you start doing $15,000 or so a year. That money that you put in before this huge crash may not grow that much before retirement, but the money you put in after the crash will be bought at low rates and will grow for a long time. You will also have put in a lot more money post crash anyway.

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

#196

Post by baddox » Thu, Jan 05, 2017, 7:04 PM UTC

toomuchtodo wrote: post #181

Frondo wrote: post #175

Earlier quoted context omitted.

Why should the coal miner get more of a voice than the guy who lives in a city? They're both citizens, right? They both get to vote on their state, city, and county stuff. Why should the guy who lives in the middle of nowhere get to say "my vote's worth 50x what yours is, sucker!!"?

https://en.wikipedia.org/wiki/Tyranny_of_the_majority

So the alternative is tyranny of the minority?

It doesn't reassure me that we give much more weight to a minority of voters just because they live in less densely populated areas. That's completely arbitrary.

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

#197

Post by harryh » Thu, Jan 05, 2017, 7:05 PM UTC

ryandrake wrote: post #165

readams wrote: post #147

Earlier quoted context omitted.

No; investments go toward productive work to create economic value. Social Security doesn't have any element that would actually create wealth. It works exactly like a Ponzi scheme.

To be fair, when I buy a company's stock on the public stock market, it's more of a lottery ticket than an investment. It's not as if buying a stock actually puts money into the company's pocket for them to use to "create economic value". Buying a stock puts money into the pocket of whoever last bought that stock so that they can continue gambling.

This is not entirely correct.

By buying stock in a given company you increase demand for that company's stock and increase its value. A company's market cap is a very real thing that allows it to engage in economic activity that it would otherwise be unable to execute on.

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

#198

Post by chatmasta » Thu, Jan 05, 2017, 7:05 PM UTC

chrisabrams wrote: post #75

fortytw2 wrote: post #54

Earlier quoted context omitted.

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 pow…

This is a great point I don't see brought up often enough. It also has a lot of implications for the "gig economy" and independent contractors.

If the majority of the workforce works as independent contractors, the government will not be able to use employers to collect ("withhold") taxes automatically from workers' paychecks. The IRS will need to wait for the contractors to explicitly pay their own taxes.

I suspect this will have a big impact on cash flow for incoming taxes. Also, it could give more power to the people should they ever choose to execute a tax boycott.

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

#199

Post by jeremyt » Thu, Jan 05, 2017, 7:05 PM UTC

dlp211 wrote: post #105

Frondo wrote: post #86

Earlier quoted context omitted.

I thought that way in my early- to mid-20s. I read lots of thoughtful articles about how SS was broke, wouldn't last, etc. As I got a little older, I started reading more about the history of SS, how it's always needed various adjustments over time, how people have always said it's going broke, it's unsustainable, etc. I realized that, for most of its history, the people who have said those things are actually more l…

To pile on to this. Even is SS makes no changes whatsoever, they can still pay out ~75% of the benefits starting in the late 2020's or early 2030's and all the way through the 2080's or 2090's based on the SS Trustee report. SS is going to be around unless we choose to elect officials that dismantle it. The fear mongering and apathy needs to stop.

I'm sorry, but this statement is not true. These numbers require the use of the Social Security trust fund. The Social Security trust fund is a "special issue treasury bond" in which money is deposited and then spent by the US government.

So, when the trustees say that Social Security can pay 75% of the benefits, what they mean is that there are enough IOUs in the trust fund to pay 75% of the benefits. But when we start redeeming the IOUs, we will quickly discover that the money isn't in existence. We are going to have to raise taxes or cut spending or otherwise get the money from somewhere else. The trust fund is just a very very clever way of obfuscating the fact that the government has no money saved at all for Social Security.

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

#200

Post by ben1040 » Thu, Jan 05, 2017, 7:06 PM UTC

chimeracoder wrote: post #21

koolba wrote: post #15

Earlier quoted context omitted.

> 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…

> For "highly paid employees" (i.e. executives) Highly Compensated Employees are not just executives. Anybody who makes more than $115,000/year qualifies, which applies to a lot of engineers. Also, anybody who controls more than 5% of the business qualifies, whether or not they are an executive, and regardless of their salary.

>Anybody who makes more than $115,000/year qualifies, which applies to a lot of engineers.

For instance I imagine Apple's automatic 401k enrollment is in part because without the participation of retail employees, their engineers in Cupertino would be caught in this.