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A preview of the U.S. without pensions

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Re: A preview of the U.S. without pensions

#151

Post by wildmusings »

avemg wrote: post #140
Joky wrote: post #127

Earlier quoted context omitted.

I'm using it to save taxes, because I'm not sure what are the alternatives. You're comment makes me feel I should be less ignorant: any good online reading to suggest?

There isn’t a good tax-advantaged alternative if you’re an employee with access to a 401k. If you’re under the income limit, you can make deductible contributions to an traditional IRA but that’s capped at $5500 per year vs $18,000 for the 401k. Plus there’s no company match there. The best practice is to contribute to your 401k up to the employer match and then contribute the rest to an IRA. Once you’re at the IRA l…

And when you leave your current job, you can transfer your 401k into a Rollover IRA, which you can invest however you want.

Re: A preview of the U.S. without pensions

#152

Post by mobilefriendly »

hkmurakami wrote: post #66
aramadia wrote: post #5

And the best part is that the next generation will have it even worse. They’ll have 75% Social security payments, little chance of building net worth through home purchases and a lifetime of $10/hr jobs.

Perversely, it may not be the worst thing if an entire generation decides that building wealth through your primary residence is not the best idea, and forgoes this in their lives and pushes their representatives to repeal the slew of incentives currently written into the tax code.

This is already happening. The new tax bill hits housing's special status three ways-- the mortgage deduction cap is lowered 25%, the standard deduction doubles (making the mortgage deduction less valuable) and high property taxes are no longer deductable.

Re: A preview of the U.S. without pensions

#153

Post by JetSpiegel »

briandear wrote: post #65
zzleeper wrote: post #63

Earlier quoted context omitted.

For company plans, you said the answer. It's silly to assume that your employer will be alive when you are 80 year sold, and also seems like a stupid idea for a company in a completely unrelated business to get into the retirement fund mgmt business. For states, the reason is population. If your pop doubles every 50 years, then you only need 2 young people to pay for one retiree. If it's the opposite (Japan now, US i…

So it’s a Ponzi scheme.

More like a loan from current workers to be repaid when those workers retire.

Re: A preview of the U.S. without pensions

#154

Post by pinewurst »

jstewartmobile wrote: post #30
nunez wrote: post #24

Earlier quoted context omitted.

Yeah the only time it makes sense to have a 401k is if your company matches your contributions.

Don't they all have a match? It would be nice if people could keep the match and have more control over their portfolios. Buy & sell stocks, bonds, commodities, etc. whenever instead of a very small basket of mutual funds that can only be juggled a few times a year.

Startups (and even quite a few more mature companies) seldom match. I'm noticing this in a job search now.

Re: A preview of the U.S. without pensions

#155

Post by ThrustVectoring »

ghufran_syed wrote: post #15

Defined benefit plans are unaffordable, whether for a company or a government. But while defined contribution actually generate great returns, they have the problem that urgent expenses always crowd out saving, particularly for lower income groups (same as it would if income taxes were collected annually, or less frequently). Seems like the optimal solution is to combine the compulsory contribution part of the curren…

There's a huge problem with defined contribution plans that isn't in defined benefit plans: the contributions belong to the retiree and get inherited by their children, rather than helping fund seniors as a class.

Ideally you'd want some sort of tontine-like features, where people receive mortality credits based on their contributions and actuarial tables for their age. It'd mean that saving enough for retirement is much more economically feasible.

Re: A preview of the U.S. without pensions

#156

Post by VLM »

ac29 wrote: post #123
advisedwang wrote: post #111

Earlier quoted context omitted.

It sounds like by closing the plant and stopping the employees reaching retirement age, they massively reduced the amount the employees were eligible to receive. Even if the pension fund was separate, by reducing eligibility this way they company had to pay less into it over the following years.

To add to that, this pension (and many others) was structured such that payouts are non-linear based on number of years worked, so for example, you might get: 0-5 years worked: no pension 5-10 years worked: 5% pension 10-20 years worked: 20% pension 30+ years worked: full pension By preventing workers from being able to work the full 30+ years, they never had to pay the full pension. One of the workers in the story m…

The popular marketing reason why the pension disappeared is the factory closed.

The real reason the pension disappeared is the proposed vesting duration was ridiculous. I am older so current jobs have no pension of course, but when I worked jobs with pensions, the vesting duration was typically something like 3 to 5 years for 100% vesting, sometimes only 2 years for 50% vesting. In fact I have a pension from a previous employer projected to be worth $800/month which by then will be about the price of one cup of starbucks coffee...

To make it crystal clear, the pension was eliminated when the vesting duration was moved from perhaps 4 years to 30+ years.

Re: A preview of the U.S. without pensions

#157

Post by nugget »

ThrustVectoring wrote: post #155
ghufran_syed wrote: post #15

Defined benefit plans are unaffordable, whether for a company or a government. But while defined contribution actually generate great returns, they have the problem that urgent expenses always crowd out saving, particularly for lower income groups (same as it would if income taxes were collected annually, or less frequently). Seems like the optimal solution is to combine the compulsory contribution part of the curren…

There's a huge problem with defined contribution plans that isn't in defined benefit plans: the contributions belong to the retiree and get inherited by their children, rather than helping fund seniors as a class. Ideally you'd want some sort of tontine-like features, where people receive mortality credits based on their contributions and actuarial tables for their age. It'd mean that saving enough for retirement is…

If you annuitize your 401k balance at retirement you're effectively participating in a Tontine-like structure with fees paid to the insurance and reinsurance companies in return for administration and risk mitigation.

Re: A preview of the U.S. without pensions

#158

Post by VLM »

cmurf wrote: post #144
Joky wrote: post #127

Earlier quoted context omitted.

I'm using it to save taxes, because I'm not sure what are the alternatives. You're comment makes me feel I should be less ignorant: any good online reading to suggest?

It's worth doing the "what if" on a Roth 401(k). The money goes in after tax, so you lose the deduction, but the money grows tax free, and you can pull it out tax free. Usually you come out ahead paying tax on less money now, and no tax on the grown investment later. You can also open an IRA on your own and stuff that to the limit every year. Again there is a Roth version, which you can dip into for certain things be…

That was a good summary. In addition, I suggest adding google for "roth income limit" or you could do worse than this URL:

https://www.rothira.com/roth-ira-limits

and/or

https://www.irs.gov/retirement-plans/2017-ira-deduction-limi...

I can't contribute to my old Roth but I have a trad IRA I can legally contribute to.

One interesting point to make is to some extent its all a waste of time; the annual contribution limit for Roth or Trad IRAs is less than the monthly cost of my Uncles nursing home; all you're going to do by investing in IRAs is make some middleman slightly richer before you go on full government assistance; the IRA is not going to last long and your body is going to last longer. The purpose of "the system" is to get all your money before you die, so struggling to accumulate more merely means you'll get some rich guy a bonus for taking lots of your money as opposed to little of someone elses money.

There are no weird income or investment limitations on plain old investment accounts, which is why my plain old brokerage account is something like 10x larger than my two IRAs. Likewise my MiL is using her suburban house as her retirement account, more or less. Also the fedgov thinks people retire at 65, every single person, which is comical; due to ageism in my field I need a way to get an income for decades before I am 65 so IRAs that limit access for decades are kinda stupid to invest in unless you're in a "pocketwatch and lifetime sinecure position" job where you can reasonably expect to retire from that single lifetime employer at 65...

Re: A preview of the U.S. without pensions

#159

Post by urbanjunkie »

pjkundert wrote: post #110
mattmanser wrote: post #82

Earlier quoted context omitted.

Western world has stopped having as many children, hence why governmemts are dead keen on immigration even though their constituents aren't.

However, immigrants are not “fungible” (as much as central planners wish they were). In fact, it’s becoming evident that certain immigrants may be a liability, and even displace potential immigrants who are valuable. This will be addressed as the facts unfold themselves, I suspect.

Why are dogs barking? Perhaps they hear a whistle...

Re: A preview of the U.S. without pensions

#160

Post by brightsize »

ajmurmann wrote: post #12
friedButter wrote: post #7

Is retirement planning (Live "below your means" and put in 20-30% or more of your salary towards long term investments), and family support (you fund your kids education and parents post retirement needs, and your kids fund your post retirement needs and your grandkids education) such an alien concept for Americans? When you manage it internally, instead of paying interest to a bank, you just have lost opportunity co…

There is lots of Americans who barely get by. I recommend taking a look at "Nickeled and Dimed" by Barbara Ehrenreich. So many people simply cannot afford to put that much money aside. To the point of family support: Many Americans move across state lines a few times during their lifetime. That very much weakens family bonds. On top of that it's much harder to take care of your parents alone while your siblings live…

++1 for "Nickel and Dimed: On (Not) Getting By in America". A fascinating read, it's the narrative of writer Barbara Ehrenreich as she goes undercover and participates in the minimum-wage economy in the US. It recounts not just her time on the clock, but equally the trials and trade-offs of simply surviving on such incomes.
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