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Having been gainfully employed in corporate IT since I was 19 - and doing max contribution to my 401k every year since - I'm not "in touch" with the predicament

by aksss 8y ago

Having been gainfully employed in corporate IT since I was 19 - and doing max contribution to my 401k every year since - I'm not "in touch" with the predicament of today's kids. Are they alright? Record employment numbers today. Wage growth up. We still have a talent shortage. Being (now) a business owner, my biggest complaint on the talent front isn't a lack of education in candidates, it's a lack of customer focus and inner curiosity (to be aggressively learning in one's spare time and on the job).

ip26 8y ago
Right, you maxed your 401k, your IRA, your HSA, and all it took was a little financial prudence, diligence, and a job paying 60k or more straight out of high school. Anybody could do it.
systemkei 8y ago
>employed in corporate IT since I was 19 unlikely you'll ever collect from that 401k friend!
- WillPostForFood 8y ago
  It is a huge disservice to take a cheap shot at 401ks. There is almost no case where someone who has the opportunity to contribute shouldn't do so.
  - parrellel 8y ago
    Eh, after fees most standard 401Ks are only marginally better than a bank account at this point.
    - nradov 8y ago
      Due to compound returns, a marginal advantage makes a huge difference over a 40 year career.
      - parrellel 8y ago
        You'd hope, but a number of smaller plans have that entire advantage eaten, so you end up with no growth. Getting out of a lot of 401K plans and into something like an IRA is... advisable in many cases. I'll admit that this is mostly a problem for small businesses, from what I read, and there are plenty of 401k's that aren't actively screwing people.
    - sparkpy724 8y ago
      I don' think you have the slightest idea what you are talking about. Almost all my 401K funds charge less than 1% a year and if you're in mostly equities you average 10% returns per year. Most bank accounts offer less than 1% Interest rates on deposits so its really not even close.
    - walshemj 8y ago
      A 401k wont be invested 100% in cash
    - stale2002 8y ago
      This is not true at all. It is very easy to get some sort of vanguard s&p 500 index fund that will get you %7 return rates, with something like .1% fees.
    - buttcoinslol 8y ago
      I doubt 1%+ expense ratio funds across the board is the average case, but I could be wrong. Perhaps if you let your 401k provider manage your money. In my 401k, I pay 1.5 bps/yr on 80% of my portfolio, a Fidelity S&P 500 fund (FXAIX), or $0.15 per $1,000 per year. My other two funds are a Fidelity Small-Cap and Fidelity Mid-Cap funds (FSSNX and FSMDX), I pay 2.5 bps/yr on the other 20% between these two funds, or $0.25 per $1,000 per year. If my balance was $100,000 right now, I would pay 80x0.15+20x0.25, or about $17/year for each $100k. $170 per million, and so on. These 401k mutual funds have better expense ratios than my Roth IRA holding, VTI (Total Market ETF), which is at 3 bps/yr, and the mutual fund couterpart of VTI, VTSAX is 4 bps. There is absolutely no possible way for a high-yield savings acct that yields (Fed Funds rate minus 15-25 bps) in interest (Goldman's marcus.com pays 2.23% APY, for instance, fed funds is ~2.40%) will ever approach my portfolio after 40 years of returns, barring total societal collapse.
  - icelancer 8y ago
    There's plenty of companies that do not provide financial match to a 401k. For people making average income for a 25 year old or so, they are better off putting it in a Roth IRA then.
    - bluGill 8y ago
      Invest in a Roth IRA first is good advice. However there are limits, you really should max out both in your early years. While you are at it you should max out your HSA (pay medical expenses in cash) Of course as others have pointed you are now investing $30,000 before you have paid for any other life expense.
- froindt 8y ago
  >unlikely you'll ever collect from that 401k friend! Like WillPostForFood, I'm baffled about where you're even getting this idea. The 401k is their money. Right now they could withdraw all the money. If their employer goes bankrupt, the 401k balance didn't change at all. The only part that could potentially go away would be unvested company contributions (I'm not sure on this - it's all I can think of though). If we were talking about a pension, Social Security, or a 457b deferred compensation plan - I get it. There's uncertainty. Pensions get underfunded routinely, private equity shenanigans occur etc. Social Security will likely see big changes in the next 40 years. In the case of the 457b plans, it's not your money until you leave the employer and start withdrawing money. Please clarify your statement if you have something productive to add.
  - martin1b 8y ago
    I think he's inferring to the government being able to get to it in the future. Whether it be by future legislation of extended early withdrawal penalties, or new tax laws. Yes, it is your money but is still subject to federal and state laws. It's different than a bank account.
    - palebluedot 8y ago
      Not really that much different with respect to their exposure to future laws; your bank account balance is subject to federal and state laws as well. Yes, future laws could affect your 401(k) balance, but the same holds true for your bank account balance (e.g., wealth taxes, etc..). But what else can you do, really? Best to put your savings into the most cost effective / tax efficient vehicle that is currently available.
Shivetya 8y ago
many want the trappings of success out of the gate and keep ignoring many of their bosses and superiors at work have a lot of time invested and earnings already. they also confuse what they seen TV for real life. tell, who doesn't have people in the lower rungs of their IT group with more expensive cars or outfits than you would feel comfortable with at twice their salary? then top off the people who eat out every day who are usually part of the "only contribute to the 401k to the match" crowd. yes there are people struggling but many who are gainfully employed struggle too because they have no discipline and worse some don't want help. the education system needs to concentrate more of teaching children to take time in acquiring things and first get a safe financial base to work from. politicians needs to stop pandering to people's jealously and blaming it all on the rich, here's a clue the real one percent outside the odd billionaire are the politicians who write the rules and sell favors through their law making work (tax code, occupational regulations, and property zoning)
- irrational 8y ago
  I tell this to my college age kids. One of them is off touring Europe right now. I asked her how she is paying for it (and pointed out that I've never been to Europe because I can't afford it). She says she is going into debt to do it, but it is okay because experiences are more important than money. She is studying anthropology and non-profit management. I've pointed out that there aren't very well paying jobs with those kind of degrees. She dismisses this and says she isn't in it for the money. How many other Gen-Z kids are also in it for the experiences and not the money? Judging by her and her friend group, she's not the only one. I tried teaching her financial prudence, but social media exerts more of an influence on her thinking than all my example and talk every could.
  - mschuster91 8y ago
    Your daughter is more financially prudent than you think: she realized that, no matter how much of her young life she lived on ramen, she will never have much in her name as most of her income will be wasted away on rents, transportation and food. So she decides to f..k it and at least have fun. Better die poor and having lived a fruitful life than die poor and having lived on ramen the entire time. With many of my generation spending upwards of 50%, sometimes even 70% or more, only on housing, how on earth are we expected to build savings? With six figure student loans that aren't dischargeable in bankruptcy and medical bills at similar conditions? We will be the explosion that finally shows how fucked up pension systems and wealth allocation have become, and this bubble will explode in about 40-50 years, if not earlier. Add climate change to the mix which our politicians won't do anything for the coming 10, 20 years and which will inevitably and unpreventably explode at the same time... yes, definitely, I rather have a life now, I won't be able to make it to retirement anyway, no matter what I do.
rhizome 8y ago
This sounds like straight-up textbook Just-World[1] logic to me. You appear to be completely discounting structural and systemic forces against economic mobility for certain members of society. 1. https://en.wikipedia.org/wiki/Just-world_hypothesis https://en.wikipedia.org/wiki/Just-world_hypothesis

by aksss 8y ago

ip26 8y ago

Right, you maxed your 401k, your IRA, your HSA, and all it took was a little financial prudence, diligence, and a job paying 60k or more straight out of high school. Anybody could do it.

systemkei 8y ago

>employed in corporate IT since I was 19 unlikely you'll ever collect from that 401k friend!

WillPostForFood 8y ago
It is a huge disservice to take a cheap shot at 401ks. There is almost no case where someone who has the opportunity to contribute shouldn't do so.
- parrellel 8y ago
  Eh, after fees most standard 401Ks are only marginally better than a bank account at this point.
  - nradov 8y ago
    Due to compound returns, a marginal advantage makes a huge difference over a 40 year career.
    - parrellel 8y ago
      You'd hope, but a number of smaller plans have that entire advantage eaten, so you end up with no growth. Getting out of a lot of 401K plans and into something like an IRA is... advisable in many cases. I'll admit that this is mostly a problem for small businesses, from what I read, and there are plenty of 401k's that aren't actively screwing people.
  - sparkpy724 8y ago
    I don' think you have the slightest idea what you are talking about. Almost all my 401K funds charge less than 1% a year and if you're in mostly equities you average 10% returns per year. Most bank accounts offer less than 1% Interest rates on deposits so its really not even close.
  - walshemj 8y ago
    A 401k wont be invested 100% in cash
  - stale2002 8y ago
    This is not true at all. It is very easy to get some sort of vanguard s&p 500 index fund that will get you %7 return rates, with something like .1% fees.
  - buttcoinslol 8y ago
    I doubt 1%+ expense ratio funds across the board is the average case, but I could be wrong. Perhaps if you let your 401k provider manage your money. In my 401k, I pay 1.5 bps/yr on 80% of my portfolio, a Fidelity S&P 500 fund (FXAIX), or $0.15 per $1,000 per year. My other two funds are a Fidelity Small-Cap and Fidelity Mid-Cap funds (FSSNX and FSMDX), I pay 2.5 bps/yr on the other 20% between these two funds, or $0.25 per $1,000 per year. If my balance was $100,000 right now, I would pay 80x0.15+20x0.25, or about $17/year for each $100k. $170 per million, and so on. These 401k mutual funds have better expense ratios than my Roth IRA holding, VTI (Total Market ETF), which is at 3 bps/yr, and the mutual fund couterpart of VTI, VTSAX is 4 bps. There is absolutely no possible way for a high-yield savings acct that yields (Fed Funds rate minus 15-25 bps) in interest (Goldman's marcus.com pays 2.23% APY, for instance, fed funds is ~2.40%) will ever approach my portfolio after 40 years of returns, barring total societal collapse.
- icelancer 8y ago
  There's plenty of companies that do not provide financial match to a 401k. For people making average income for a 25 year old or so, they are better off putting it in a Roth IRA then.
  - bluGill 8y ago
    Invest in a Roth IRA first is good advice. However there are limits, you really should max out both in your early years. While you are at it you should max out your HSA (pay medical expenses in cash) Of course as others have pointed you are now investing $30,000 before you have paid for any other life expense.
froindt 8y ago
>unlikely you'll ever collect from that 401k friend! Like WillPostForFood, I'm baffled about where you're even getting this idea. The 401k is their money. Right now they could withdraw all the money. If their employer goes bankrupt, the 401k balance didn't change at all. The only part that could potentially go away would be unvested company contributions (I'm not sure on this - it's all I can think of though). If we were talking about a pension, Social Security, or a 457b deferred compensation plan - I get it. There's uncertainty. Pensions get underfunded routinely, private equity shenanigans occur etc. Social Security will likely see big changes in the next 40 years. In the case of the 457b plans, it's not your money until you leave the employer and start withdrawing money. Please clarify your statement if you have something productive to add.
- martin1b 8y ago
  I think he's inferring to the government being able to get to it in the future. Whether it be by future legislation of extended early withdrawal penalties, or new tax laws. Yes, it is your money but is still subject to federal and state laws. It's different than a bank account.
  - palebluedot 8y ago
    Not really that much different with respect to their exposure to future laws; your bank account balance is subject to federal and state laws as well. Yes, future laws could affect your 401(k) balance, but the same holds true for your bank account balance (e.g., wealth taxes, etc..). But what else can you do, really? Best to put your savings into the most cost effective / tax efficient vehicle that is currently available.

Shivetya 8y ago

many want the trappings of success out of the gate and keep ignoring many of their bosses and superiors at work have a lot of time invested and earnings already. they also confuse what they seen TV for real life. tell, who doesn't have people in the lower rungs of their IT group with more expensive cars or outfits than you would feel comfortable with at twice their salary? then top off the people who eat out every day who are usually part of the "only contribute to the 401k to the match" crowd. yes there are people struggling but many who are gainfully employed struggle too because they have no discipline and worse some don't want help. the education system needs to concentrate more of teaching children to take time in acquiring things and first get a safe financial base to work from. politicians needs to stop pandering to people's jealously and blaming it all on the rich, here's a clue the real one percent outside the odd billionaire are the politicians who write the rules and sell favors through their law making work (tax code, occupational regulations, and property zoning)

irrational 8y ago
I tell this to my college age kids. One of them is off touring Europe right now. I asked her how she is paying for it (and pointed out that I've never been to Europe because I can't afford it). She says she is going into debt to do it, but it is okay because experiences are more important than money. She is studying anthropology and non-profit management. I've pointed out that there aren't very well paying jobs with those kind of degrees. She dismisses this and says she isn't in it for the money. How many other Gen-Z kids are also in it for the experiences and not the money? Judging by her and her friend group, she's not the only one. I tried teaching her financial prudence, but social media exerts more of an influence on her thinking than all my example and talk every could.
- mschuster91 8y ago
  Your daughter is more financially prudent than you think: she realized that, no matter how much of her young life she lived on ramen, she will never have much in her name as most of her income will be wasted away on rents, transportation and food. So she decides to f..k it and at least have fun. Better die poor and having lived a fruitful life than die poor and having lived on ramen the entire time. With many of my generation spending upwards of 50%, sometimes even 70% or more, only on housing, how on earth are we expected to build savings? With six figure student loans that aren't dischargeable in bankruptcy and medical bills at similar conditions? We will be the explosion that finally shows how fucked up pension systems and wealth allocation have become, and this bubble will explode in about 40-50 years, if not earlier. Add climate change to the mix which our politicians won't do anything for the coming 10, 20 years and which will inevitably and unpreventably explode at the same time... yes, definitely, I rather have a life now, I won't be able to make it to retirement anyway, no matter what I do.

rhizome 8y ago

This sounds like straight-up textbook Just-World[1] logic to me. You appear to be completely discounting structural and systemic forces against economic mobility for certain members of society. 1. https://en.wikipedia.org/wiki/Just-world_hypothesis https://en.wikipedia.org/wiki/Just-world_hypothesis