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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

#61

Post by Naga »

thraway2016 wrote: post #49
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.

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 driv…

I choose to ignore serious but unlikely events like that in my planning. A nuclear exchange or grey goo scenario is going to ruin my retirement plans no matter if I keep my investments in cash or in stocks. I'll have bigger problems than if I can sell my investments or not.

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

#62

Post by chimeracoder »

koolba wrote: post #25
chimeracoder wrote: post #21

Earlier quoted context omitted.

> 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.

They'd qualify but I'm pretty sure when the law was first written it didn't have them in mind. It was specifically to prevent top level executives or business owners (>=5% of company) from creating 401k plans for only themselves.

> They'd qualify but I'm pretty sure when the law was first written it didn't have them in mind. It was specifically to prevent top level executives or business owners (>=5% of company) from creating 401k plans for only themselves.

Even if that was the rhetoric used when creating the rule, I'd be very skeptical of assuming that was the case, rather than it being motivated by a desire to increase tax revenue, as a lot of these tax rules are designed to do. $115,000 is a really low threshold to use to define "executive" - many blue-collar workers make far more than that.

(And furthermore, the rule still does not prohibit highly-compensated employees from contributing; it just requires them to pay taxes on the excess of the permitted amount.)

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

#63

Post by jeremy_k »

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.

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

#64

Post by pwthornton »

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)…

The point of my post is that you are buying shares of something, and that crashes and downturns don't permanently harm your 401k. Also, crashes when you are young are good because you get to buy cheap shares.

I could have gone into more detail, as you have done here, but that's not the point. The point is that downturns like the Great Recession do not permanently harm someone's retirement.

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

#65

Post by erubin »

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…

It's true that many tech workers are eventually affected by the contribution limit, but my understanding is that it's essentially always smart to contribute to tax-advantaged accounts while possible.

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

#66

Post by hooloovoo_zoo »

jameskegel wrote: post #46
justinph wrote: post #42

Earlier quoted context omitted.

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?

Page 12 and 13 of this report https://www.ssa.gov/oact/tr/2016/tr2016.pdf.

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

#67

Post by [deleted] »

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.

[deleted]

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

#68

Post by aardvark291 »

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 an accounting detail.

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

#69

Post by garysieling »

jameskegel wrote: post #46
justinph wrote: post #42

Earlier quoted context omitted.

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?

It's a pay-go system, it works that way by design
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