4 ms·

I agree, and the same should be true for health insurance, gym memberships, etc. However, in a practical sense, your point doesn’t matter because all retiremen

by mlthoughts2018 8y ago

I agree, and the same should be true for health insurance, gym memberships, etc. However, in a practical sense, your point doesn’t matter because all retirement plans accessible to the majority of people are employer-based. Most people only get access to 401(k) plans through an employer, and the only reason it’s worthwhile for them is for the employer match (asset growth won’t be meaningful, particularly compared with inflation). Often there are also vesting issues as well. I worked for a company once where if your tenure at the company was less than 4 years, the company got all of its contributions back. Many other employers offer no matching whatsoever, and in that case you really have to ask yourself whether it wouldn’t be better to instead pay taxes up front and just invest retail into some low-fee broad-market ETF on your own, rather than to trap money away behind penalties and tax complexity in a 401(k) where you’re not even getting a company match. So we are still equally reliant on employers as the facilitator of access to a retirement benefit. Functionally it’s truly not different than pensions, only the underlying financial instrument is different. You do point out that depending on an employer for retirement is a bad idea, but in the absence of greatly expanded social security and nationalized health care, depending on an employer who at least has the chance to use its scale to mitigate risk in the retirement instrument is about the best you can do. Expecting individuals with little or no access to meaningful financial planning services to manage the risk profile of their own retirement vehicle is ludicrously stupid by comparison. Individuals can be wiped out by unexpected legal bills, insurance technicalities, early death of a provider, etc. Infividuals are not the right level of entity to be juggling these risks. Instead it points to a moral failure on the part of corporations, forsaking loyal workers in favor of complex strategies to extract labor without being compelled to absorb the risk of retirement financial solvency.

lsc 8y ago
>Most people only get access to 401(k) plans through an employer, and the only reason it’s worthwhile for them is for the employer match (asset growth won’t be meaningful, particularly compared with inflation). It's tax deferred, too, which is pretty important. Even if you don't think asset growth is significant (and it usually is significant... it's just not guaranteed or predictable) In your peak earning years, you are making a bunch of money (hopefully) and therefore paying a bunch in taxes. In your retirement, well, maybe you'll be making a lot of money, in which case, paying taxes isn't such a big deal, or maybe you won't be making very much money at all, in which case, you won't have to pay very much in taxes on that money. At least if you are where I am, making good money (and paying good taxes) but don't have a huge amount stashed away, stashing pre-tax money has huge benefits over stashing post-tax money. (If you do stash post-tax money, check into the roth IRA; it means you won't pay taxes when you take it out. Of course, you can only directly contribute to a roth ira if you don't make much money... but the 'backdoor roth' is something to ask your tax professional about... and if you earn enough that you can't contribute to a roth ira, you should have a tax professional. I personally recommend the 'enrolled agent' credential) I think the only time you don't want to max out your tax-advantaged savings palan is if you aren't making enough money to max out your tax-advantaged plans and save enough short term money.
lsc 8y ago
>So we are still equally reliant on employers as the facilitator of access to a retirement benefit. Functionally it’s truly not different than pensions, only the underlying financial instrument is different. No, 401K pensions are 'defined contribution' systems; you put in X, your employer puts in X/2 (or whatever it is they decide. X/2 is common in my area, but as you point out, some lower-end employers contribute nothing at all, while others have weird vesting schedules on it.) - when you retire, you get out... however much that money has grow (or lost) - no guarantees, just a tax deferral on money you invest for retirement. Usually when people talk about pensions, they are talking about /defined benefit/ pensions. These are essentially like an annuity that is only good if the issuing company doesn't go under; you work until you retire, and you get some fixed amount of income every month until you die (or the company goes under) The idea that a defined benefit pension is very much like a lifetime annuity is key to understanding why pensions seem to work fine in some times and not so fine in other times; In the '80s, when my parents were getting jobs that got them defined benefit pensions, you could run out and buy T-bills and expect to make significantly more than inflation. annuities made a lot of sense. By the time it was my turn in the late 90s/early aughts? T-bills no longer returned significantly more than inflation. Safe investments became a lot less profitable, and thus defined benefit pensions became a lot more difficult.
- mlthoughts2018 8y ago
  My comment was that even though 401(k) plans are defined contribution plans and are very different than pensions, most people are still dependent on their employer for access to them and there are laws severely limiting what you can contribute outside of payroll deductions via an employer, Roth vs traditional, one-time roll-overs, etc. It’s still just as tied up with employers as before, even though the instrument functions very differently (some might argue it operates far worse) than pensions. Often if you lost a job or changed jobs after some years of service, you were eligible for partially vested pension amounts, so even the idea that you can “take your 401(k) with you” when you quit / lose a job is still pretty analogous with employer tie-ups in pensions. And there can be issues about vesting for an employer match or no match at all. Additionally, the employer chooses who your asset manager will be, and may not choose a large, low-fee, good customer service option like Vanguard or something. Just another way the employer dictates how this retirement vehicle affects workers. I’m not saying 401(k) is the same as defined benefit at all. Only that the move towards defined contribution plans has not actually decoupled retirement plans from employer intervention in any meaningful way. Employer control is roughly just as it always has been, only now employees are forced to bear the risk of the underlying assets, instead of compeling the employer organization (which is far more capable of absorbing risk and riding out downsides) to bear that risk.

lsc 8y ago

>Most people only get access to 401(k) plans through an employer, and the only reason it’s worthwhile for them is for the employer match (asset growth won’t be meaningful, particularly compared with inflation). It's tax deferred, too, which is pretty important. Even if you don't think asset growth is significant (and it usually is significant... it's just not guaranteed or predictable) In your peak earning years, you are making a bunch of money (hopefully) and therefore paying a bunch in taxes. In your retirement, well, maybe you'll be making a lot of money, in which case, paying taxes isn't such a big deal, or maybe you won't be making very much money at all, in which case, you won't have to pay very much in taxes on that money. At least if you are where I am, making good money (and paying good taxes) but don't have a huge amount stashed away, stashing pre-tax money has huge benefits over stashing post-tax money. (If you do stash post-tax money, check into the roth IRA; it means you won't pay taxes when you take it out. Of course, you can only directly contribute to a roth ira if you don't make much money... but the 'backdoor roth' is something to ask your tax professional about... and if you earn enough that you can't contribute to a roth ira, you should have a tax professional. I personally recommend the 'enrolled agent' credential) I think the only time you don't want to max out your tax-advantaged savings palan is if you aren't making enough money to max out your tax-advantaged plans and save enough short term money.

lsc 8y ago

>So we are still equally reliant on employers as the facilitator of access to a retirement benefit. Functionally it’s truly not different than pensions, only the underlying financial instrument is different. No, 401K pensions are 'defined contribution' systems; you put in X, your employer puts in X/2 (or whatever it is they decide. X/2 is common in my area, but as you point out, some lower-end employers contribute nothing at all, while others have weird vesting schedules on it.) - when you retire, you get out... however much that money has grow (or lost) - no guarantees, just a tax deferral on money you invest for retirement. Usually when people talk about pensions, they are talking about /defined benefit/ pensions. These are essentially like an annuity that is only good if the issuing company doesn't go under; you work until you retire, and you get some fixed amount of income every month until you die (or the company goes under) The idea that a defined benefit pension is very much like a lifetime annuity is key to understanding why pensions seem to work fine in some times and not so fine in other times; In the '80s, when my parents were getting jobs that got them defined benefit pensions, you could run out and buy T-bills and expect to make significantly more than inflation. annuities made a lot of sense. By the time it was my turn in the late 90s/early aughts? T-bills no longer returned significantly more than inflation. Safe investments became a lot less profitable, and thus defined benefit pensions became a lot more difficult.

mlthoughts2018 8y ago
My comment was that even though 401(k) plans are defined contribution plans and are very different than pensions, most people are still dependent on their employer for access to them and there are laws severely limiting what you can contribute outside of payroll deductions via an employer, Roth vs traditional, one-time roll-overs, etc. It’s still just as tied up with employers as before, even though the instrument functions very differently (some might argue it operates far worse) than pensions. Often if you lost a job or changed jobs after some years of service, you were eligible for partially vested pension amounts, so even the idea that you can “take your 401(k) with you” when you quit / lose a job is still pretty analogous with employer tie-ups in pensions. And there can be issues about vesting for an employer match or no match at all. Additionally, the employer chooses who your asset manager will be, and may not choose a large, low-fee, good customer service option like Vanguard or something. Just another way the employer dictates how this retirement vehicle affects workers. I’m not saying 401(k) is the same as defined benefit at all. Only that the move towards defined contribution plans has not actually decoupled retirement plans from employer intervention in any meaningful way. Employer control is roughly just as it always has been, only now employees are forced to bear the risk of the underlying assets, instead of compeling the employer organization (which is far more capable of absorbing risk and riding out downsides) to bear that risk.