23 ms·

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

115 points by uptown 10y ago

astockwell 10y ago
Headline is shameless click-bait. Percentage change is much more valuable than absolute dollars. From the article: "An increase in retirement savings of 0.6 percentage points [from 2010 to 2015]".
- apendleton 10y ago
  As the article also says, though, that's a ten percent increase. That's significant.
- AngrySkillzz 10y ago
  Reading is fundamental. 0.6 on a rate of 6.2. That's roughly 10%. What would you do if your savings was 10% larger?
chiph 10y ago
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.
- Spooky23 10y ago
  Really? Its been a very good year for me. IIRC approximately 13% returns.
- uptown 10y ago
  Where are you seeing markets as flat over the past year? https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1483650000000&chddm=99314&chls=IntervalBasedLine&cmpto=INDEXDJX:.DJI&cmptdms=0&q=NYSEARCA:VTI&ntsp=0&ei=JHtuWJm8E8WkecqPu-AK https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...
- tcoppi 10y ago
  There are also potentially even more people withdrawing money from the markets as baby boomers are retiring en mass now. But also having said that, they haven't been flat over the past year. 2015 was a flat year, maybe that's what you're thinking of?
- dmoy 10y ago
  S&P 500 is up 20% in 2016... not sure what you're talking about.
  - bk_geek 10y ago
    S&P 500 gained approx 9.5% in 2016
    - dmoy 10y ago
      Ah you're right, I went in a bit later than the start of the year, looks like it took a dive a bit and then went back up. So I'm up ~20% following the S&P500, just not for the full calendar year.
- Kluny 10y ago
  My funds are doing quite well. Gains of about 7%.
callinyouin 10y ago
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.
- Ixiaus 10y ago
  I just turned thirty and I can echo your sentiments; I'm saving aggressively and investing across a wide array of assets and tax sheltered accounts with the idea that I may at best retire early and be capable of taking care of myself into old age.
- cjkalsdf 10y ago
  You think the stock market will be around when you are old enough to need your 401k? I max my contributions but I have no faith they won't be wiped out in some future crash.
  - pwthornton 10y ago
    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.
    - SEJeff 10y ago
      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) is literally at an all time high and is on the cusp of 20,000: https://www.google.com/finance?cid=983582 https://www.google.com/finance?cid=983582 Edit: Changes "shares in instruments to shares or instruments". It was a bit ambiguous and I was originally trying to make it more obvious that shares are considered instruments (along with several other things traded).
squozzer 10y ago
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?
- jbtule 10y ago
  There are a lot of rules in regards to auto-enroll and qualified investments. If you are auto-enrolled, you are going to be in a mix of bonds and stocks appropriate to your age (conservatively), or just a balanced fund. So not really designed to prop the stock market.
- hellogoodbyeeee 10y ago
  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.
  - forgottenpass 10y ago
    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.
  - TheCoelacanth 10y ago
    The most likely is 3) Your HR department doesn't want their highly compensated employees' contributions to be rejected because the plan is top-heavy and is too cheap to make a safe harbor contribution to avoid that.
- zeroer 10y ago
  You're too paranoid. I think it's more easily explained by the company executives acting in self-interested ways to get participation up so that the 401(k) plans don't run afoul of anti-discrimination rules.
vinhboy 10y ago
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.
- chimeracoder 10y ago
  > Also, auto-enrolling people into 401K sounds kinda like... ya know... social security. Except that you have control over how your 401(k) gets allocated, along with additional ways to access those funds early (with a penalty) in case of emergencies. Furthermore, 401(k)s are explicitly not comingled, whereas the entire premise of Social Security is that the funds are comingled.
  - vinhboy 10y ago
    Yea, but it also says a lot of people auto invest in target date funds. So essentially it's saying it works better when people just leave it alone. But yes, I understand your point.
- tcoppi 10y ago
  401(k) plans are set up by your employer but any money you put into it and gains are legally yours.
- koolba 10y ago
  > 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.
  - vinhboy 10y ago
    Oh.. thanks for that tidbit. I didn't know there was an incentive for them.
sikim 10y ago
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 liability in your retirement.
- chimeracoder 10y ago
  > By having both pre-tax (401k) and post-tax (Roth IRA), you would be also diversifying your tax liability in your retirement. The way your comment is written, it implies that 401(k)s are necessarily pre-tax and IRAs are necessarily post-tax. Both 401(k)s and IRAs come in Traditional and Roth forms, so you could also use pre-tax money for contributing to your IRA, and post-tax money for contributing to your 401(k), or any combination thereof. You can also split contributions - ie, contribute to all four accounts in the same year - as long as your total contributions are within the limits.
  - sikim 10y ago
    Yes, that is correct. I generally prefer to have my 401k all pre-tax (traditional) and my IRA post-tax (roth) to make it easier to manage. Also, this would open doors for backdoor roth IRA contribution once you go over the government's income limit for contributing to IRA, but this is a whole different topic.
    - dlp211 10y ago
      There is also the mega-backdoor Roth, but your 401k plan needs to support it.
- klodolph 10y ago
  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 IRA.
lucidguppy 10y ago
If they take away my social security... I want my payments back.
- jeffdavis 10y ago
  Easy to accommodate: either continue your SS with a benefit of $100/mo; or take away your benefit and return you your inflated dollars.
  - strictnein 10y ago
    The ROI on future social security payments for most tech workers is already ~0%, so inflated dollars would be an improvement on that.
- ryandrake 10y ago
  Social security is not a savings account. It's not "you paying for future you". It's you paying for others now, and later, others will be paying for you.
- umanwizard 10y ago
  If they cancel some welfare program (like free lunch for poor school kids), do you want your money back that you paid into the program while it existed? What sense does this make?
  - kdamken 10y ago
    Not the best comparison. Besides being a requirement, you pay into social security based on the assumption that you'll get benefits when you're older. If you paid for 20 years and then the program went bust and you didn't receive anything, I think you'd rightly feel ripped off.
    - umanwizard 10y ago
      > you pay into social security based on the assumption that you'll get benefits when you're older. No. If you think this is how social security works then you have been tricked. Social Security is a welfare program for old people. A better analogy is if you paid for free lunches for kids, then you have a kid and also become poor, but they cancel the program, you'd feel ripped off. The reason it doesn't intuitively feel the same way (even though it is) is because middle class people have a much higher chance of ever becoming old than ever becoming poor.
temp246810 10y ago
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 think that I should be zagging here when everyone is zigging. Unfortunately, however, I can't figure out what that other thing should be.
- garethsprice 10y ago
  Far from "everyone" - the majority of Americans are massively undersaving. If you are able to max out your 401k every year and track the market in index funds you'll be far ahead of the vast majority of people at retirement. The first generation of people who were expected to save privately are yet to retire. 29% of 55 and older have ZERO savings, and the average of those who do is $104k, which is a $310/mo annuity (GAO, 2015). There is a generational crisis brewing.
  - cableshaft 10y ago
    Just wait until the young people of this generation reach retirement. Those numbers will likely be even scarier.
- fnovd 10y ago
  Investing is simply buying something you think will increase in value over time. US stocks have traditionally been an excellent vehicle due to their rates of growth. You could also invest in bonds, purchased annuities, real estate, gold and silver, foreign currencies & companies, Bitcoin/Ethereum, your offspring, domain names, collectibles... What do you think people will value in the next 10, 20, 50 years?
  - DesiLurker 10y ago
    guns, lots of guns [insert matrix gif]..
sgustard 10y ago
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 now at its highest point.
- lintiness 10y ago
  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/ http://www.multpl.com/shiller-pe/
  - jcdavis 10y ago
    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-stocks-up.html http://brooklyninvestor.blogspot.com/2016/11/bonds-down-stoc...
    - Jeema101 10y ago
      I'm not sure where that guy is getting his data, but I think the average stock market P/E when 10 year treasury rates are in the 4-6% range is more like 19. But maybe he's looking at 'forward P/E' or something. http://qvmgroup.com/invest/2013/06/22/sp-500-pes-versus-10-yr-treasury-rates-from-1957/ http://qvmgroup.com/invest/2013/06/22/sp-500-pes-versus-10-y...
  - DoodleBuggy 10y ago
    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.
dawhizkid 10y ago
I'm counting on basic income being a thing when I retire.
- etjossem 10y ago
  Basic income will come with a corresponding increase in prices for consumer goods across the board. As demand for everything beyond the most essential staples goes up, prices will be adjusted upward until supply is able to satisfy new demand. Even if you're right, you will still want to have saved some money.
  - ones_and_zeros 10y ago
    Yes a price increase is a first order effect of demand increasing. In capitalist economies demand is great because of the second and third order effects.
  - xienze 10y ago
    Duh, just vote for the guy that promises a higher basic income!
- ProAm 10y ago
  What do you think Social Security is?
  - etjossem 10y ago
    Not what we mean when we talk about basic income. Basic income means "everyone gets a check for $1000 a month, regardless of how old or young they are, or whether or not they work." Social Security means "everyone gets a check for $X a month, once they are old enough, variable based on how much they earned when they worked."
    - ProAm 10y ago
      The OP said, "I'm counting on basic income being a thing when I retire." -- He is counting on Social Security.
kasperni 10y ago
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.
- oddsockmachine 10y ago
  I have no pension account. My first software job was with a pensions administration firm, where I had to take numerous courses on the economics behind pensions. Boring stuff, but the one thing that the teachers drilled into us over and over was that, for my cohort (currently <30yo), pensions would be a waste of our money - with the exception of the few "gold-plated" ones still offered by certain employers. If anyone's interested, I have instead chosen to aim for the so-called Lean-FIRE, and my "investment", if you can call it that, is in fertile land in a stable country and extensive experience in permaculture. I'm about 5 years away from being able to semi-retire and being reasonably self-sufficient in food, power and water.
- rpwilcox 10y ago
  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...)
  - awinder 10y ago
    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.
codegeek 10y ago
For self employed, it is even better. You can put up to 54,000 for 2017 [0]. If you are self employed and can afford to do this, do it. It usually splits in 2 parts: - Employee portion: $18,000 that you can put as an employee. - Employer portion: Up to 25% of W-2 wages. The total of the 2 above cannot exceed 54K for 2017. One more thing, you can make contributions for employer portion until the calendar year end which is March. So even for 2016, you can still make the employer portion if you were enrolled in a self employed 401K. Another thing is that the employer portion can be shown as an expense of your business as well. If you use Fidelity or Vanguard, stick most of it in an index fund and you have the S&P 500 returns by doing nothing. I highly recommend any self employed to read this IRS publication. [0] https://www.irs.gov/retirement-plans/one-participant-401k-plans https://www.irs.gov/retirement-plans/one-participant-401k-pl...
payne92 10y ago
If the employer does any matching at all, a 401(k) is a no brainer in most cases.
guelo 10y ago
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.
- saryant 10y ago
  My 401k has better funds than I could ever get in my IRA. Yes, many 401k's have terrible fund choices but by no means do all of them fall prey to that. Also, if you're maxing out both your IRA and 401k limits, even if you have a lousy 401k, you now have tax-advantaged dollars that you can roll over to Vanguard or Fidelity when you change jobs.
  - curiousbiped 10y ago
    It sucks that we have to use our employer's 401k vendor. We should be able to have our 401k contributions sent to any valid 401k provider like Vanguard/Fidelity/etc instead of only being able to move it when we switch jobs.
  - avemg 10y ago
    Why do you think the funds in your 401k are better than you could ever get in your IRA? You can open an IRA account anywhere you want. If the funds available where you are now aren't good, just move somewhere with better choices.
- jartelt 10y ago
  A 401k plan can offer low fee Vanguard funds. If your employee has crappy 401k fund options, you should take the issue up with your employer. They likely chose a inexpensive 401k administrator to run the plan to cut costs and left the employees with expensive funds to pick from. Alternatively, if you are self-employed you can open your own i401k through Vanguard. IRAs are great, but the contribution limits are not very high.
- ASinclair 10y ago
  Not all 401(k)s are created equal. If you work for a large company it's entirely possible you have access to funds with lower fees in your 401(k) than in an IRA.
ProAm 10y ago
> because most individuals have virtually no influence on national outcomes. How can you say this after Trump was elected?
- hillz 10y ago
  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.
  - ProAm 10y ago
    Popular vote has never meant anything in America in all it's existence. But the point is a person with zero political experience, completely outside the political echo chamber/insiders club just won the most powerful office on earth. Whether you are for him or against him I believe it does show that people can absolutely start a change.
    - thesimpsons1022 10y ago
      nothing changed. instead of a racist white old billionaire buying a candidate, they just decided to run themselves.
      - ProAm 10y ago
        Im not making this a political argument, just stating the fact that people absolutely had a hand in this election.
        eli_gottlieb 10y ago
        Just because you're surprised, doesn't mean it was "the people". You can't have an Electoral College system in which shuffling Toledo across state lines changes the electoral outcome and credit the people for political outcomes.
        10y ago
timrosenblatt 10y ago
FWIW "Billions of dollars" should be considered in the context that 1 million people * $1,000 = $1 billion. The US is ~300m people. So, this headline is something like "1/3 of 1% of the US is putting an extra $1,000 in their 401k recently" (really more like 1-2% of the _workforce_ but the point remains)
thesimpsons1022 10y ago
obviously alabama and wisconsin need their votes to count much more than california or new york. rednecks deserve their voice to be heard 10x more than well educated tolerant people on the coasts.
- EpicEng 10y ago
  And this is why the rest of us can't stand people like you. I lived on the west coast for more than a decade and people were not generally better or worse than when I lived in rural IL. Get your head out of your ass.
- saryant 10y ago
  I grew up in California. Bay Area. There's plenty of intolerance there too. Anyone who thinks it's a utopia is deluding themselves.
  - gragas 10y ago
    >There's plenty of intolerance there too. I agree. If I were to wear a Trump hat there, I'd probably be mugged or punched in the face at the very least.
    - saryant 10y ago
      In middle school, an orthodontist refused to take me on as a patient because my father worked for an oil company.
- TallGuyShort 10y ago
  I think you mean tolerant-of-a-different-subset-of-things.
- AnimalMuppet 10y ago
  Oddly, you don't sound very tolerant...
  - legodt 10y ago
chrisabrams 10y ago
Am I the only one that is scared of 401ks? It sounds nice: put your money into an account tax-free, let it grow tax free over 30-40 years. When you retire, you have this nice large fund to pull money from. My biggest fear is that in 30-40 years the US government and/or 401k funds are so poorly run that they tax 50/60/70% of the income (withdrawals) out of the 401k to sustain theirselves. Lots of people tell me "that won't happen" but when I study history, I realize that the only people who think that are ones who have never lived through a major war. Wars = higher taxes. To me, putting money in a 401k is trusting that everything will be ok for a long time to come, and it's just hard to justify that the way history books show the cycles of war. It scares me so much that I'd rather pay the taxes now, and invest as I please. Edit: as omouse mentioned, that is my other fear. That through technology and healthcare innovations, as well as the government recognizing the need to "adjusting" the retirement age, how do I know I will get my 401k at 65? What if it is 85? That's too risky for me :/
- omouse 10y ago
  You should be scared, in Canada the government pushed the retirement age from 65 to 67 so that's 2 years more of working and 2 more years before you have access to your own cash.
  - uiri 10y ago
    That is for CPP/OAS which is the equivalent of US Social Security. You don't get access to your own cash - that goes to current retirees. You pay to current retirees for longer and start getting access to current workers' cash later. Canada's RRSPs are actually a much better system. They are straight up tax deferral. You can put money into your RRSP at any age up to 70 so long as you have contribution room (ie: you're employed). Later, if you wind up unemployed and therefore in a lower tax bracket than when you put money in, you can take the money out. If the Canadian government instituted some sort of tax on RRSPs, they wouldn't be able to act fast enough to prevent people from massively draining their RRSPs before new rules took effect. In the US, you have to wait until you are 59.5, or you begin collecting periodic payments (ie: as if it were a pension), or you pay a 10% penalty.
lcfcjs 10y ago
Personally, I have put all my extra money into property. I plan to retire way before the government says I can. I won't be kept working by an organization run by someone like Trump.
bogomipz 10y ago
It's interesting when the 401k was introduced it was meant to be one leg in a "three-legged stool" for retirement planning. Those three legs consisting of pension, social security and savings when it was introduced. For people in the private sector that is now a two-legged stool as pensions went the way of the evening news paper and indemnity health care plans. Its interesting to note that law makers in Washington DC all have pensions and indemnity health care plans. Only the best for them. I've often wondered at how different things would be if they were subject to the same health care and retirement options as the rest of the population. http://www.investopedia.com/ask/answers/09/three-legged-stool-retirement.asp http://www.investopedia.com/ask/answers/09/three-legged-stoo... http://financialanswers.com/page.php?b=24549975-0&c=1027 http://financialanswers.com/page.php?b=24549975-0&c=1027

115 points by uptown 10y ago

Headline is shameless click-bait. Percentage change is much more valuable than absolute dollars. From the article: "An increase in retirement savings of 0.6 percentage points [from 2010 to 2015]".

apendleton 10y ago
As the article also says, though, that's a ten percent increase. That's significant.
AngrySkillzz 10y ago
Reading is fundamental. 0.6 on a rate of 6.2. That's roughly 10%. What would you do if your savings was 10% larger?

chiph 10y ago

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.

Spooky23 10y ago
Really? Its been a very good year for me. IIRC approximately 13% returns.
uptown 10y ago
Where are you seeing markets as flat over the past year? https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1483650000000&chddm=99314&chls=IntervalBasedLine&cmpto=INDEXDJX:.DJI&cmptdms=0&q=NYSEARCA:VTI&ntsp=0&ei=JHtuWJm8E8WkecqPu-AK https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...
tcoppi 10y ago
There are also potentially even more people withdrawing money from the markets as baby boomers are retiring en mass now. But also having said that, they haven't been flat over the past year. 2015 was a flat year, maybe that's what you're thinking of?
dmoy 10y ago
S&P 500 is up 20% in 2016... not sure what you're talking about.
- bk_geek 10y ago
  S&P 500 gained approx 9.5% in 2016
  - dmoy 10y ago
    Ah you're right, I went in a bit later than the start of the year, looks like it took a dive a bit and then went back up. So I'm up ~20% following the S&P500, just not for the full calendar year.
Kluny 10y ago
My funds are doing quite well. Gains of about 7%.

callinyouin 10y ago

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.

Ixiaus 10y ago
I just turned thirty and I can echo your sentiments; I'm saving aggressively and investing across a wide array of assets and tax sheltered accounts with the idea that I may at best retire early and be capable of taking care of myself into old age.
cjkalsdf 10y ago
You think the stock market will be around when you are old enough to need your 401k? I max my contributions but I have no faith they won't be wiped out in some future crash.
- pwthornton 10y ago
  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.
  - SEJeff 10y ago
    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) is literally at an all time high and is on the cusp of 20,000: https://www.google.com/finance?cid=983582 https://www.google.com/finance?cid=983582 Edit: Changes "shares in instruments to shares or instruments". It was a bit ambiguous and I was originally trying to make it more obvious that shares are considered instruments (along with several other things traded).

squozzer 10y ago

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?

jbtule 10y ago
There are a lot of rules in regards to auto-enroll and qualified investments. If you are auto-enrolled, you are going to be in a mix of bonds and stocks appropriate to your age (conservatively), or just a balanced fund. So not really designed to prop the stock market.
hellogoodbyeeee 10y ago
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.
- forgottenpass 10y ago
  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.
- TheCoelacanth 10y ago
  The most likely is 3) Your HR department doesn't want their highly compensated employees' contributions to be rejected because the plan is top-heavy and is too cheap to make a safe harbor contribution to avoid that.
zeroer 10y ago
You're too paranoid. I think it's more easily explained by the company executives acting in self-interested ways to get participation up so that the 401(k) plans don't run afoul of anti-discrimination rules.

vinhboy 10y ago

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.

chimeracoder 10y ago
> Also, auto-enrolling people into 401K sounds kinda like... ya know... social security. Except that you have control over how your 401(k) gets allocated, along with additional ways to access those funds early (with a penalty) in case of emergencies. Furthermore, 401(k)s are explicitly not comingled, whereas the entire premise of Social Security is that the funds are comingled.
- vinhboy 10y ago
  Yea, but it also says a lot of people auto invest in target date funds. So essentially it's saying it works better when people just leave it alone. But yes, I understand your point.
tcoppi 10y ago
401(k) plans are set up by your employer but any money you put into it and gains are legally yours.
koolba 10y ago
> 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.
- vinhboy 10y ago
  Oh.. thanks for that tidbit. I didn't know there was an incentive for them.

sikim 10y ago

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 liability in your retirement.

chimeracoder 10y ago
> By having both pre-tax (401k) and post-tax (Roth IRA), you would be also diversifying your tax liability in your retirement. The way your comment is written, it implies that 401(k)s are necessarily pre-tax and IRAs are necessarily post-tax. Both 401(k)s and IRAs come in Traditional and Roth forms, so you could also use pre-tax money for contributing to your IRA, and post-tax money for contributing to your 401(k), or any combination thereof. You can also split contributions - ie, contribute to all four accounts in the same year - as long as your total contributions are within the limits.
- sikim 10y ago
  Yes, that is correct. I generally prefer to have my 401k all pre-tax (traditional) and my IRA post-tax (roth) to make it easier to manage. Also, this would open doors for backdoor roth IRA contribution once you go over the government's income limit for contributing to IRA, but this is a whole different topic.
  - dlp211 10y ago
    There is also the mega-backdoor Roth, but your 401k plan needs to support it.
klodolph 10y ago
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 IRA.

lucidguppy 10y ago

If they take away my social security... I want my payments back.

jeffdavis 10y ago
Easy to accommodate: either continue your SS with a benefit of $100/mo; or take away your benefit and return you your inflated dollars.
- strictnein 10y ago
  The ROI on future social security payments for most tech workers is already ~0%, so inflated dollars would be an improvement on that.
ryandrake 10y ago
Social security is not a savings account. It's not "you paying for future you". It's you paying for others now, and later, others will be paying for you.
umanwizard 10y ago
If they cancel some welfare program (like free lunch for poor school kids), do you want your money back that you paid into the program while it existed? What sense does this make?
- kdamken 10y ago
  Not the best comparison. Besides being a requirement, you pay into social security based on the assumption that you'll get benefits when you're older. If you paid for 20 years and then the program went bust and you didn't receive anything, I think you'd rightly feel ripped off.
  - umanwizard 10y ago
    > you pay into social security based on the assumption that you'll get benefits when you're older. No. If you think this is how social security works then you have been tricked. Social Security is a welfare program for old people. A better analogy is if you paid for free lunches for kids, then you have a kid and also become poor, but they cancel the program, you'd feel ripped off. The reason it doesn't intuitively feel the same way (even though it is) is because middle class people have a much higher chance of ever becoming old than ever becoming poor.

temp246810 10y ago

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 think that I should be zagging here when everyone is zigging. Unfortunately, however, I can't figure out what that other thing should be.

garethsprice 10y ago
Far from "everyone" - the majority of Americans are massively undersaving. If you are able to max out your 401k every year and track the market in index funds you'll be far ahead of the vast majority of people at retirement. The first generation of people who were expected to save privately are yet to retire. 29% of 55 and older have ZERO savings, and the average of those who do is $104k, which is a $310/mo annuity (GAO, 2015). There is a generational crisis brewing.
- cableshaft 10y ago
  Just wait until the young people of this generation reach retirement. Those numbers will likely be even scarier.
fnovd 10y ago
Investing is simply buying something you think will increase in value over time. US stocks have traditionally been an excellent vehicle due to their rates of growth. You could also invest in bonds, purchased annuities, real estate, gold and silver, foreign currencies & companies, Bitcoin/Ethereum, your offspring, domain names, collectibles... What do you think people will value in the next 10, 20, 50 years?
- DesiLurker 10y ago
  guns, lots of guns [insert matrix gif]..

sgustard 10y ago

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 now at its highest point.

lintiness 10y ago
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/ http://www.multpl.com/shiller-pe/
- jcdavis 10y ago
  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-stocks-up.html http://brooklyninvestor.blogspot.com/2016/11/bonds-down-stoc...
  - Jeema101 10y ago
    I'm not sure where that guy is getting his data, but I think the average stock market P/E when 10 year treasury rates are in the 4-6% range is more like 19. But maybe he's looking at 'forward P/E' or something. http://qvmgroup.com/invest/2013/06/22/sp-500-pes-versus-10-yr-treasury-rates-from-1957/ http://qvmgroup.com/invest/2013/06/22/sp-500-pes-versus-10-y...
- DoodleBuggy 10y ago
  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.

dawhizkid 10y ago

I'm counting on basic income being a thing when I retire.

etjossem 10y ago
Basic income will come with a corresponding increase in prices for consumer goods across the board. As demand for everything beyond the most essential staples goes up, prices will be adjusted upward until supply is able to satisfy new demand. Even if you're right, you will still want to have saved some money.
- ones_and_zeros 10y ago
  Yes a price increase is a first order effect of demand increasing. In capitalist economies demand is great because of the second and third order effects.
- xienze 10y ago
  Duh, just vote for the guy that promises a higher basic income!
ProAm 10y ago
What do you think Social Security is?
- etjossem 10y ago
  Not what we mean when we talk about basic income. Basic income means "everyone gets a check for $1000 a month, regardless of how old or young they are, or whether or not they work." Social Security means "everyone gets a check for $X a month, once they are old enough, variable based on how much they earned when they worked."
  - ProAm 10y ago
    The OP said, "I'm counting on basic income being a thing when I retire." -- He is counting on Social Security.

kasperni 10y ago

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.

oddsockmachine 10y ago
I have no pension account. My first software job was with a pensions administration firm, where I had to take numerous courses on the economics behind pensions. Boring stuff, but the one thing that the teachers drilled into us over and over was that, for my cohort (currently <30yo), pensions would be a waste of our money - with the exception of the few "gold-plated" ones still offered by certain employers. If anyone's interested, I have instead chosen to aim for the so-called Lean-FIRE, and my "investment", if you can call it that, is in fertile land in a stable country and extensive experience in permaculture. I'm about 5 years away from being able to semi-retire and being reasonably self-sufficient in food, power and water.
rpwilcox 10y ago
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...)
- awinder 10y ago
  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.

codegeek 10y ago

For self employed, it is even better. You can put up to 54,000 for 2017 [0]. If you are self employed and can afford to do this, do it. It usually splits in 2 parts: - Employee portion: $18,000 that you can put as an employee. - Employer portion: Up to 25% of W-2 wages. The total of the 2 above cannot exceed 54K for 2017. One more thing, you can make contributions for employer portion until the calendar year end which is March. So even for 2016, you can still make the employer portion if you were enrolled in a self employed 401K. Another thing is that the employer portion can be shown as an expense of your business as well. If you use Fidelity or Vanguard, stick most of it in an index fund and you have the S&P 500 returns by doing nothing. I highly recommend any self employed to read this IRS publication. [0] https://www.irs.gov/retirement-plans/one-participant-401k-plans https://www.irs.gov/retirement-plans/one-participant-401k-pl...

payne92 10y ago

If the employer does any matching at all, a 401(k) is a no brainer in most cases.

guelo 10y ago

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.

saryant 10y ago
My 401k has better funds than I could ever get in my IRA. Yes, many 401k's have terrible fund choices but by no means do all of them fall prey to that. Also, if you're maxing out both your IRA and 401k limits, even if you have a lousy 401k, you now have tax-advantaged dollars that you can roll over to Vanguard or Fidelity when you change jobs.
- curiousbiped 10y ago
  It sucks that we have to use our employer's 401k vendor. We should be able to have our 401k contributions sent to any valid 401k provider like Vanguard/Fidelity/etc instead of only being able to move it when we switch jobs.
- avemg 10y ago
  Why do you think the funds in your 401k are better than you could ever get in your IRA? You can open an IRA account anywhere you want. If the funds available where you are now aren't good, just move somewhere with better choices.
jartelt 10y ago
A 401k plan can offer low fee Vanguard funds. If your employee has crappy 401k fund options, you should take the issue up with your employer. They likely chose a inexpensive 401k administrator to run the plan to cut costs and left the employees with expensive funds to pick from. Alternatively, if you are self-employed you can open your own i401k through Vanguard. IRAs are great, but the contribution limits are not very high.
ASinclair 10y ago
Not all 401(k)s are created equal. If you work for a large company it's entirely possible you have access to funds with lower fees in your 401(k) than in an IRA.

ProAm 10y ago

> because most individuals have virtually no influence on national outcomes. How can you say this after Trump was elected?

hillz 10y ago
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.
- ProAm 10y ago
  Popular vote has never meant anything in America in all it's existence. But the point is a person with zero political experience, completely outside the political echo chamber/insiders club just won the most powerful office on earth. Whether you are for him or against him I believe it does show that people can absolutely start a change.
  - thesimpsons1022 10y ago
    nothing changed. instead of a racist white old billionaire buying a candidate, they just decided to run themselves.
    - ProAm 10y ago
      Im not making this a political argument, just stating the fact that people absolutely had a hand in this election.
      - eli_gottlieb 10y ago
        Just because you're surprised, doesn't mean it was "the people". You can't have an Electoral College system in which shuffling Toledo across state lines changes the electoral outcome and credit the people for political outcomes.
        10y ago

timrosenblatt 10y ago

FWIW "Billions of dollars" should be considered in the context that 1 million people * $1,000 = $1 billion. The US is ~300m people. So, this headline is something like "1/3 of 1% of the US is putting an extra $1,000 in their 401k recently" (really more like 1-2% of the _workforce_ but the point remains)

thesimpsons1022 10y ago

obviously alabama and wisconsin need their votes to count much more than california or new york. rednecks deserve their voice to be heard 10x more than well educated tolerant people on the coasts.

EpicEng 10y ago
And this is why the rest of us can't stand people like you. I lived on the west coast for more than a decade and people were not generally better or worse than when I lived in rural IL. Get your head out of your ass.
saryant 10y ago
I grew up in California. Bay Area. There's plenty of intolerance there too. Anyone who thinks it's a utopia is deluding themselves.
- gragas 10y ago
  >There's plenty of intolerance there too. I agree. If I were to wear a Trump hat there, I'd probably be mugged or punched in the face at the very least.
  - saryant 10y ago
    In middle school, an orthodontist refused to take me on as a patient because my father worked for an oil company.
TallGuyShort 10y ago
I think you mean tolerant-of-a-different-subset-of-things.
AnimalMuppet 10y ago
Oddly, you don't sound very tolerant...
- legodt 10y ago

chrisabrams 10y ago

Am I the only one that is scared of 401ks? It sounds nice: put your money into an account tax-free, let it grow tax free over 30-40 years. When you retire, you have this nice large fund to pull money from. My biggest fear is that in 30-40 years the US government and/or 401k funds are so poorly run that they tax 50/60/70% of the income (withdrawals) out of the 401k to sustain theirselves. Lots of people tell me "that won't happen" but when I study history, I realize that the only people who think that are ones who have never lived through a major war. Wars = higher taxes. To me, putting money in a 401k is trusting that everything will be ok for a long time to come, and it's just hard to justify that the way history books show the cycles of war. It scares me so much that I'd rather pay the taxes now, and invest as I please. Edit: as omouse mentioned, that is my other fear. That through technology and healthcare innovations, as well as the government recognizing the need to "adjusting" the retirement age, how do I know I will get my 401k at 65? What if it is 85? That's too risky for me :/

omouse 10y ago
You should be scared, in Canada the government pushed the retirement age from 65 to 67 so that's 2 years more of working and 2 more years before you have access to your own cash.
- uiri 10y ago
  That is for CPP/OAS which is the equivalent of US Social Security. You don't get access to your own cash - that goes to current retirees. You pay to current retirees for longer and start getting access to current workers' cash later. Canada's RRSPs are actually a much better system. They are straight up tax deferral. You can put money into your RRSP at any age up to 70 so long as you have contribution room (ie: you're employed). Later, if you wind up unemployed and therefore in a lower tax bracket than when you put money in, you can take the money out. If the Canadian government instituted some sort of tax on RRSPs, they wouldn't be able to act fast enough to prevent people from massively draining their RRSPs before new rules took effect. In the US, you have to wait until you are 59.5, or you begin collecting periodic payments (ie: as if it were a pension), or you pay a 10% penalty.

lcfcjs 10y ago

Personally, I have put all my extra money into property. I plan to retire way before the government says I can. I won't be kept working by an organization run by someone like Trump.

bogomipz 10y ago

It's interesting when the 401k was introduced it was meant to be one leg in a "three-legged stool" for retirement planning. Those three legs consisting of pension, social security and savings when it was introduced. For people in the private sector that is now a two-legged stool as pensions went the way of the evening news paper and indemnity health care plans. Its interesting to note that law makers in Washington DC all have pensions and indemnity health care plans. Only the best for them. I've often wondered at how different things would be if they were subject to the same health care and retirement options as the rest of the population. http://www.investopedia.com/ask/answers/09/three-legged-stool-retirement.asp http://www.investopedia.com/ask/answers/09/three-legged-stoo... http://financialanswers.com/page.php?b=24549975-0&c=1027 http://financialanswers.com/page.php?b=24549975-0&c=1027