6 ms·

So, if you don't have a job where you can put away $6500 a year into an IRA and max out your match with a 401K are you screwed?

overcast 9y ago
I mean, it takes money to make money. It's also not required to max anything out. If you can only put $10 a week into retirement, put $10 a week into retirement, until you can put $15 a week.
- dabber 9y ago
  I'm honestly not sure why your getting downvoted. Maybe the "takes money to make money" line? Otherwise that seems like reasonable advice. If you can't max out your IRA every year then that's just how it is but it's certainly a good idea to contribute what you can. Right? Could someone shed some light if I'm missing something?
  - loeg 9y ago
    Not missing anything. It's better to save the dollar you can now, even if it doesn't seem like much.
jldugger 9y ago
The 'good' news here is that Social Security isn't a terrible ROI at low incomes.
- evv 9y ago
  Right, if Social Security hasn't collapsed by the time you need it.
  - xyzzyz 9y ago
    Social Security existence is based on the state ability to extract taxes, and voters rejecting candidates who want to dismantle it. 401k depends on stock market being up in the critical time you need it. If I were to bet what is more likely to collapse, it’s rather stock market.
    - closeparen 9y ago
      Collecting a growing pot of tax revenue from a shrinking pool of workers will not be without challenges. Emigration seems likely, although I suppose the elderly majority can then vote in an exit visa scheme.
    - enraged_camel 9y ago
      >>401k depends on stock market being up in the critical time you need it. If your portfolio allocation is incorrect, sure. But by the time people get close to retirement, most of their investments should be in bonds, which are quite insulated from the ups and downs of the stock market.
      - xyzzyz 9y ago
        What do you do when the stock market collapses as you start moving into bonds?
        closeparen 9y ago
        That’s something you do by degrees over years. A couple years’ blip isn’t going to hurt that much.
        steelframe 9y ago
        If you want to take an ultra-conservative approach, then 7 years from retirement, transfer 7 years worth of expected draws against your portfolio into bonds. If the market crashes the day before the "7 years from retirement" point, then wait 7 years to make that move into bonds and do it just when you retire. If things are in such horrible shape that the market fails to recover over any given 7-year period of time, expect shotgun shells and canned food to be the new currency anyway.
thaumaturgy 9y ago
Realistically: yes. It's uncomfortable and nobody ever wants to hear it, and it's quick to get shouted down (especially in forums like HN where everyone is either wealthy or only "temporarily" poor), but if you can't afford to put $5500 into an IRA each year while also keeping your emergency fund topped up for 12 months' expenses while also still having enough extra for at least one little vacation that year -- then you're poor. Not middle class, but poor. And, statistically speaking, if you're poor now, then you're likely to be poor for the rest of your life. America continues to run on the idea that that's not true, but that's a clever bit of marketing intended to keep people from realizing just how truly screwed they are. This isn't to say that you're destitute or that it's impossible to live well at more modest means. Many people do.
- taurath 9y ago
  Lol, by that measure 80%+ of the US is poor. The reality is much of that 80% of people are doing okay, and can survive a hiccup or two either by having enough money to expense themselves through it, unemployment or disability. If you’re in a high COL area I’d say that’s where you need to have a lot more money stashed. 12 months expenses isn’t reasonable for most people under 40.
  - thaumaturgy 9y ago
    > Lol, by that measure 80%+ of the US is poor. Yep. Not really a laughing matter. > Only 39% of Americans have enough savings to cover a $1,000 emergency https://www.cnbc.com/2018/01/18/few-americans-have-enough-savings-to-cover-a-1000-emergency.html https://www.cnbc.com/2018/01/18/few-americans-have-enough-sa... Relying on unemployment, disability, or having enough money (or, in most cases, credit) to "expense a hiccup or two" is not middle class. And people under 40 should have an easier time developing an emergency fund, because their expenses should be lower. People over 40 should have an easier time maintaining the emergency fund because it should be an investment account that they started before they were 30. Your reply is a pretty good example of the amazing impact that political marketing has had on popular views towards wealth and poverty in this country. People have become entirely convinced that they aren't poor so long as they "can survive", that poverty is something that happens to the other people they hear about on the television. $5500 a year, plus one vacation, plus building or maintaining an emergency fund, should amount to saving about $10,000 a year. The second-to-bottom, 15% tax bracket tops out at $37,950 for single people, and IRA contributions are 100% tax deductible, so you can safely gross up to $43,450 in that bracket. (edit: math.) If it sounds difficult to squirrel away 25% gross annually in that bracket, that's because that's not the middle class bracket. It's the "poor" bracket.

overcast 9y ago

I mean, it takes money to make money. It's also not required to max anything out. If you can only put $10 a week into retirement, put $10 a week into retirement, until you can put $15 a week.

dabber 9y ago
I'm honestly not sure why your getting downvoted. Maybe the "takes money to make money" line? Otherwise that seems like reasonable advice. If you can't max out your IRA every year then that's just how it is but it's certainly a good idea to contribute what you can. Right? Could someone shed some light if I'm missing something?
- loeg 9y ago
  Not missing anything. It's better to save the dollar you can now, even if it doesn't seem like much.

jldugger 9y ago

The 'good' news here is that Social Security isn't a terrible ROI at low incomes.

evv 9y ago
Right, if Social Security hasn't collapsed by the time you need it.
- xyzzyz 9y ago
  Social Security existence is based on the state ability to extract taxes, and voters rejecting candidates who want to dismantle it. 401k depends on stock market being up in the critical time you need it. If I were to bet what is more likely to collapse, it’s rather stock market.
  - closeparen 9y ago
    Collecting a growing pot of tax revenue from a shrinking pool of workers will not be without challenges. Emigration seems likely, although I suppose the elderly majority can then vote in an exit visa scheme.
  - enraged_camel 9y ago
    >>401k depends on stock market being up in the critical time you need it. If your portfolio allocation is incorrect, sure. But by the time people get close to retirement, most of their investments should be in bonds, which are quite insulated from the ups and downs of the stock market.
    - xyzzyz 9y ago
      What do you do when the stock market collapses as you start moving into bonds?
      - closeparen 9y ago
        That’s something you do by degrees over years. A couple years’ blip isn’t going to hurt that much.
      - steelframe 9y ago
        If you want to take an ultra-conservative approach, then 7 years from retirement, transfer 7 years worth of expected draws against your portfolio into bonds. If the market crashes the day before the "7 years from retirement" point, then wait 7 years to make that move into bonds and do it just when you retire. If things are in such horrible shape that the market fails to recover over any given 7-year period of time, expect shotgun shells and canned food to be the new currency anyway.

thaumaturgy 9y ago

Realistically: yes. It's uncomfortable and nobody ever wants to hear it, and it's quick to get shouted down (especially in forums like HN where everyone is either wealthy or only "temporarily" poor), but if you can't afford to put $5500 into an IRA each year while also keeping your emergency fund topped up for 12 months' expenses while also still having enough extra for at least one little vacation that year -- then you're poor. Not middle class, but poor. And, statistically speaking, if you're poor now, then you're likely to be poor for the rest of your life. America continues to run on the idea that that's not true, but that's a clever bit of marketing intended to keep people from realizing just how truly screwed they are. This isn't to say that you're destitute or that it's impossible to live well at more modest means. Many people do.

taurath 9y ago
Lol, by that measure 80%+ of the US is poor. The reality is much of that 80% of people are doing okay, and can survive a hiccup or two either by having enough money to expense themselves through it, unemployment or disability. If you’re in a high COL area I’d say that’s where you need to have a lot more money stashed. 12 months expenses isn’t reasonable for most people under 40.
- thaumaturgy 9y ago
  > Lol, by that measure 80%+ of the US is poor. Yep. Not really a laughing matter. > Only 39% of Americans have enough savings to cover a $1,000 emergency https://www.cnbc.com/2018/01/18/few-americans-have-enough-savings-to-cover-a-1000-emergency.html https://www.cnbc.com/2018/01/18/few-americans-have-enough-sa... Relying on unemployment, disability, or having enough money (or, in most cases, credit) to "expense a hiccup or two" is not middle class. And people under 40 should have an easier time developing an emergency fund, because their expenses should be lower. People over 40 should have an easier time maintaining the emergency fund because it should be an investment account that they started before they were 30. Your reply is a pretty good example of the amazing impact that political marketing has had on popular views towards wealth and poverty in this country. People have become entirely convinced that they aren't poor so long as they "can survive", that poverty is something that happens to the other people they hear about on the television. $5500 a year, plus one vacation, plus building or maintaining an emergency fund, should amount to saving about $10,000 a year. The second-to-bottom, 15% tax bracket tops out at $37,950 for single people, and IRA contributions are 100% tax deductible, so you can safely gross up to $43,450 in that bracket. (edit: math.) If it sounds difficult to squirrel away 25% gross annually in that bracket, that's because that's not the middle class bracket. It's the "poor" bracket.