4 ms·

...And then gradually reduced their employer contributions to said plans to a pittance, or even zero. At that point, you might as well do your own thing with V

...And then gradually reduced their employer contributions to said plans to a pittance, or even zero. At that point, you might as well do your own thing with Vanguard or Fidelity. The net result is the company got rid of the retirement plan, and started reselling other companies' commercial retirement plan products to their employees.

astura 9y ago
Even if your employer's contribution is zero there's significant tax benefits for contributing to a 401(k) vs "doing your own thing with Vanguard or Fidelity." You can also "do your own thing with Vanguard or Fidelity" in an IRA, which has the tax benefits of a 401(k), however, the yearly contribution limits are unreasonably low, especially compared to a 401(k).
- logfromblammo 9y ago
  Conceptually, the company is no longer contributing anything towards employee retirement. They are a transparent entity, ticking off the minimum requirements to realize the benefits from section 401(k), and don't do anything beyond telling the payroll company to divert X amount from the employee's paycheck, managed by that company, to their retirement fund account, managed by yet another company. If there is no employer contribution, you essentially already are doing your own thing, except with whomever your company picked to be the retirement benefits manager, instead of it being your own choice. So you create your own IRA at the company you pick, and roll over everything from your employer's 401(k) into it every time you switch jobs.
  - astura 9y ago
    Let me be clear: hallow retirement plans really grind my gears. So much so that I strongly believe they should be illegal, either offer a real retirement plan or don't offer one at all. Minimum employer contributions should absolutely be mandatory. I also think that IRA and 401(k) contribution limits should be combined, so none of this "$5,500 IRA limit and $18,500 401(k) limit," it should be "$24,000 combined 401(k)/IRA limit." I was just saying that if you are young and have $10,000 a year to save for retirement you are better off, from a tax perspective, saving $5,500 into an IRA and $4,500 in your hallow 401(k) rather than saving $5,500 into an IRA and $4,500 in your Fidelity brokerage account. That's it.
    - logfromblammo 9y ago
      I think we're actually saying the same thing from two different directions. My concern is that companies that offer a hollow 401(k) are actually getting some kind of kickback for forcing all of their employees to one company as their retirement benefits manager, or to a specific subset of portfolio options with that company, and the employees have no effective recourse, because of the separate contribution limits. If the limits were combined, there would be no reason whatsoever to insert the no-contribution employer as middleman into retirement planning, or even to deposit more into the employer-sponsored plan than the maximum matching amount. Most of the companies are implicitly saying "you're on your own after you retire", but the law still says you have to invest through your employer to min/max your retirement plan. Given that many of them will dump employees long before retirement age anyway, it makes less and less sense for any retirement account to inexplicably have an employer's corporate logo pasted onto it.
  - mcherm 9y ago
    I think you might be missing astura 's point: you are essentially doing your own thing, restricted to the investment choices your company made HOWEVER, the government gives you a tax break on it that is much bigger than the tax break they would offer if you just did an IRA at the company you picked. I think it points out the dangers of government regulating too closely, but it IS a valid point.

astura 9y ago

Even if your employer's contribution is zero there's significant tax benefits for contributing to a 401(k) vs "doing your own thing with Vanguard or Fidelity." You can also "do your own thing with Vanguard or Fidelity" in an IRA, which has the tax benefits of a 401(k), however, the yearly contribution limits are unreasonably low, especially compared to a 401(k).

logfromblammo 9y ago
Conceptually, the company is no longer contributing anything towards employee retirement. They are a transparent entity, ticking off the minimum requirements to realize the benefits from section 401(k), and don't do anything beyond telling the payroll company to divert X amount from the employee's paycheck, managed by that company, to their retirement fund account, managed by yet another company. If there is no employer contribution, you essentially already are doing your own thing, except with whomever your company picked to be the retirement benefits manager, instead of it being your own choice. So you create your own IRA at the company you pick, and roll over everything from your employer's 401(k) into it every time you switch jobs.
- astura 9y ago
  Let me be clear: hallow retirement plans really grind my gears. So much so that I strongly believe they should be illegal, either offer a real retirement plan or don't offer one at all. Minimum employer contributions should absolutely be mandatory. I also think that IRA and 401(k) contribution limits should be combined, so none of this "$5,500 IRA limit and $18,500 401(k) limit," it should be "$24,000 combined 401(k)/IRA limit." I was just saying that if you are young and have $10,000 a year to save for retirement you are better off, from a tax perspective, saving $5,500 into an IRA and $4,500 in your hallow 401(k) rather than saving $5,500 into an IRA and $4,500 in your Fidelity brokerage account. That's it.
  - logfromblammo 9y ago
    I think we're actually saying the same thing from two different directions. My concern is that companies that offer a hollow 401(k) are actually getting some kind of kickback for forcing all of their employees to one company as their retirement benefits manager, or to a specific subset of portfolio options with that company, and the employees have no effective recourse, because of the separate contribution limits. If the limits were combined, there would be no reason whatsoever to insert the no-contribution employer as middleman into retirement planning, or even to deposit more into the employer-sponsored plan than the maximum matching amount. Most of the companies are implicitly saying "you're on your own after you retire", but the law still says you have to invest through your employer to min/max your retirement plan. Given that many of them will dump employees long before retirement age anyway, it makes less and less sense for any retirement account to inexplicably have an employer's corporate logo pasted onto it.
- mcherm 9y ago
  I think you might be missing astura 's point: you are essentially doing your own thing, restricted to the investment choices your company made HOWEVER, the government gives you a tax break on it that is much bigger than the tax break they would offer if you just did an IRA at the company you picked. I think it points out the dangers of government regulating too closely, but it IS a valid point.