5 ms·

Despite the offer of stock based compensation for employees, I still think this is a bad idea. The 401k is one of the most effective ways to encourage long-term

by jsight 6y ago

Despite the offer of stock based compensation for employees, I still think this is a bad idea. The 401k is one of the most effective ways to encourage long-term savings among employees. Its an important benefit with significant tax advantages.

nemo44x 6y ago
Can't you take your shares and deposit them in your 401K (pre-tax) and then sell them within it (not taxed) and exchange for a fund or w/e you're interested in diversifying with?
- bri3d 6y ago
  I have never, ever heard of the ability to vest RSUs into a 401k (or even an IRA, which would at least make a little bit more sense), has anyone else?
  - toomuchtodo 6y ago
    A company can match 401k contributions with company stock. If you were receiving a rapidly appreciating stock as part of your compensation package, it would make sense to want to have the option (but not the obligation) to receive your Tesla stock in your 401k to shield it from income taxes in the short term. https://www.federalreserve.gov/pubs/feds/2004/200423/200423pap.pdf https://www.federalreserve.gov/pubs/feds/2004/200423/200423p... http://www.pensionrights.org/issues/legislation/company-stock-investments-401k-plans http://www.pensionrights.org/issues/legislation/company-stoc...
    - lvh 6y ago
      If it was rapidly appreciating surely you'd _want_ the immediate income tax hit and move it to a Roth 401(k)?
      - toomuchtodo 6y ago
        Really depends on your current income, projected retirement income, current and future tax brackets, if your 401k supports Roth contributions and in service conversions, etc. To your point, the goal is to optimize for capital appreciation and minimizing tax drag on that capital for its investment duration.
        lvh 6y ago
        Surely we can agree that for the specific case we're discussing: TSLA TTM, you would prefer the Roth version of that at every income level if it was available.
        toomuchtodo 6y ago
        I agree.
- bluejekyll 6y ago
  401k’s generally have a limited number of funds available to trade. I think the reasoning is to protect the employee from poor investments. I’ve never seen one that allows you to trade on individual stocks, only funds.
  - lvh 6y ago
    Generally, yes, but the thing you're looking for is called "self-directed" and is supported by most major providers. The nicest one if you really want to do this is probably Schwab. The problem with GP's scheme isn't that there's a good reason you can't hold whatever security you want in your retirement account: it's that you can't make the contribution in-kind from a taxable brokerage to your tax-advantaged 401(k)/IRA. It's true that that's rare: but that's because your employer is giving you a shitty 401(k). Ask me about the Latacora 401(k) one day.
  - riahi 6y ago
    This entirely depends on the plan agreements. I’ve had hospital 401ks that use fidelity and have access to brokeragelink which lets you trade individual stocks.
  - gegtik 6y ago
    That would track if they simply didn't offer 401k matching. If you read the article it seems more like a bait-and-switch. Employees are in a position to speculatively contribute to their 401K not knowing if the offered match is going to happen. ---- quote ---- It is the third straight year the automaker has not made any contributions to its 401(k) plan, according to the filing. The Tesla Inc. 401(k) Plan automatically enrolls participants in the plan with a deferral rate of 5% of employees' salaries with the option to contribute more, according to the plan's most recent Form 5500 filing. According to the Form 5500, the plan allows for an "employer discretionary matching and/or an employer discretionary non-elective contribution subject to certain eligibility requirements." Those requirements were not met for the 2019 plan year, according to the Form 5500. The nature of those requirements for Tesla to make contributions to the 401(k) plan was not available. The stock price for the automaker was up 695% for the year ended Dec. 31.
  - bob1029 6y ago
- Jtsummers 6y ago
  It’s not an IRA. 401k plans have very limited options for how to invest the money. Usually some bonds (low fixed rates) and index funds. There’s also usually some targeted funds which balance the risk for you and an “income” fund which is very low risk but tries to do better than the fixed rate bonds. And with an IRA, you can only deposit money not stocks. You have to sell first, deposit the money, and reinvest.
- lvh 6y ago
  Unclear how the "deposit shares in 401(k)" step works. 401(k) contributions come from salary: you can't just put random things in your 401(k) except in specific circumstances (like a rollover). You can do in-kind transfers _out of_ an IRA (and maybe a 401(k), I'm not sure), but you can't do in-kind transfers _into_ a 401(k) or IRA. IRA contributions have to be cash, 401(k) contributions have to be cash comp. The employer could match with shares in some circumstances, but the point of the article is that Tesla is forgoing all matches, so that's not relevant.
- deleted 6y ago
  [deleted]
yohannparis 6y ago
I might say that Pension plan are the most effective ways to encourage long-term savings among employees.
- JKCalhoun 6y ago
  Would you trust a pension plan though? I feel like my entire life I've read about companies going belly up, raided by vulture capitalists, and in the end a court determines that the pensioners get nothing and have no case.
  - OldHand2018 6y ago
    You’re reading about an extremely small subset of companies with pensions. However, they serve as a very cautionary tale: pensions do not have zero risk. They are very far from it. I’m not sure if I’ve ever seen a risk comparison between defined benefit (pension) and defined contribution (401k) plans. I’d suspect that the defined benefit risk is lower, but not by much. There are two main problems with pensions that I see: 1. The longer you work someplace, the more locked in you are. Pensions are structured such that working at the same place for 40 years is better than working at four different places for 10 years each, even if you get paid the exact same salary. 2. When you die, your children get nothing. With the 401k, whatever your balance is goes to your heirs. You can argue that it is better for society for your children to get nothing: that is a valid point of view. But we have a system in place where some people pass on assets to their children and others do not, and the differentiator between the two is the employer. That’s crazy, and the only logical way to play this game is to be on the winning side.
  - yohannparis 6y ago
    Everything has an inherent risk. But I would prefer an insured and well-managed pension plan that cannot be touched but the company than a personal 401k. Not everybody wants to play wall street games to insure a good retirement plan. I would prefer pay someone to do it.
- closeparen 6y ago
  In 50 years will you buy Tesla out of obligation to your elders with Tesla pensions? Or will you buy from a new company with lower prices and better R&D because it doesn’t have pension obligations to pay yet?

by jsight 6y ago

nemo44x 6y ago

Can't you take your shares and deposit them in your 401K (pre-tax) and then sell them within it (not taxed) and exchange for a fund or w/e you're interested in diversifying with?

bri3d 6y ago
I have never, ever heard of the ability to vest RSUs into a 401k (or even an IRA, which would at least make a little bit more sense), has anyone else?
- toomuchtodo 6y ago
  A company can match 401k contributions with company stock. If you were receiving a rapidly appreciating stock as part of your compensation package, it would make sense to want to have the option (but not the obligation) to receive your Tesla stock in your 401k to shield it from income taxes in the short term. https://www.federalreserve.gov/pubs/feds/2004/200423/200423pap.pdf https://www.federalreserve.gov/pubs/feds/2004/200423/200423p... http://www.pensionrights.org/issues/legislation/company-stock-investments-401k-plans http://www.pensionrights.org/issues/legislation/company-stoc...
  - lvh 6y ago
    If it was rapidly appreciating surely you'd _want_ the immediate income tax hit and move it to a Roth 401(k)?
    - toomuchtodo 6y ago
      Really depends on your current income, projected retirement income, current and future tax brackets, if your 401k supports Roth contributions and in service conversions, etc. To your point, the goal is to optimize for capital appreciation and minimizing tax drag on that capital for its investment duration.
      - lvh 6y ago
        Surely we can agree that for the specific case we're discussing: TSLA TTM, you would prefer the Roth version of that at every income level if it was available.
        toomuchtodo 6y ago
        I agree.
bluejekyll 6y ago
401k’s generally have a limited number of funds available to trade. I think the reasoning is to protect the employee from poor investments. I’ve never seen one that allows you to trade on individual stocks, only funds.
- lvh 6y ago
  Generally, yes, but the thing you're looking for is called "self-directed" and is supported by most major providers. The nicest one if you really want to do this is probably Schwab. The problem with GP's scheme isn't that there's a good reason you can't hold whatever security you want in your retirement account: it's that you can't make the contribution in-kind from a taxable brokerage to your tax-advantaged 401(k)/IRA. It's true that that's rare: but that's because your employer is giving you a shitty 401(k). Ask me about the Latacora 401(k) one day.
- riahi 6y ago
  This entirely depends on the plan agreements. I’ve had hospital 401ks that use fidelity and have access to brokeragelink which lets you trade individual stocks.
- gegtik 6y ago
  That would track if they simply didn't offer 401k matching. If you read the article it seems more like a bait-and-switch. Employees are in a position to speculatively contribute to their 401K not knowing if the offered match is going to happen. ---- quote ---- It is the third straight year the automaker has not made any contributions to its 401(k) plan, according to the filing. The Tesla Inc. 401(k) Plan automatically enrolls participants in the plan with a deferral rate of 5% of employees' salaries with the option to contribute more, according to the plan's most recent Form 5500 filing. According to the Form 5500, the plan allows for an "employer discretionary matching and/or an employer discretionary non-elective contribution subject to certain eligibility requirements." Those requirements were not met for the 2019 plan year, according to the Form 5500. The nature of those requirements for Tesla to make contributions to the 401(k) plan was not available. The stock price for the automaker was up 695% for the year ended Dec. 31.
- bob1029 6y ago
Jtsummers 6y ago
It’s not an IRA. 401k plans have very limited options for how to invest the money. Usually some bonds (low fixed rates) and index funds. There’s also usually some targeted funds which balance the risk for you and an “income” fund which is very low risk but tries to do better than the fixed rate bonds. And with an IRA, you can only deposit money not stocks. You have to sell first, deposit the money, and reinvest.
lvh 6y ago
Unclear how the "deposit shares in 401(k)" step works. 401(k) contributions come from salary: you can't just put random things in your 401(k) except in specific circumstances (like a rollover). You can do in-kind transfers _out of_ an IRA (and maybe a 401(k), I'm not sure), but you can't do in-kind transfers _into_ a 401(k) or IRA. IRA contributions have to be cash, 401(k) contributions have to be cash comp. The employer could match with shares in some circumstances, but the point of the article is that Tesla is forgoing all matches, so that's not relevant.
deleted 6y ago
[deleted]

yohannparis 6y ago

I might say that Pension plan are the most effective ways to encourage long-term savings among employees.

JKCalhoun 6y ago
Would you trust a pension plan though? I feel like my entire life I've read about companies going belly up, raided by vulture capitalists, and in the end a court determines that the pensioners get nothing and have no case.
- OldHand2018 6y ago
  You’re reading about an extremely small subset of companies with pensions. However, they serve as a very cautionary tale: pensions do not have zero risk. They are very far from it. I’m not sure if I’ve ever seen a risk comparison between defined benefit (pension) and defined contribution (401k) plans. I’d suspect that the defined benefit risk is lower, but not by much. There are two main problems with pensions that I see: 1. The longer you work someplace, the more locked in you are. Pensions are structured such that working at the same place for 40 years is better than working at four different places for 10 years each, even if you get paid the exact same salary. 2. When you die, your children get nothing. With the 401k, whatever your balance is goes to your heirs. You can argue that it is better for society for your children to get nothing: that is a valid point of view. But we have a system in place where some people pass on assets to their children and others do not, and the differentiator between the two is the employer. That’s crazy, and the only logical way to play this game is to be on the winning side.
- yohannparis 6y ago
  Everything has an inherent risk. But I would prefer an insured and well-managed pension plan that cannot be touched but the company than a personal 401k. Not everybody wants to play wall street games to insure a good retirement plan. I would prefer pay someone to do it.
closeparen 6y ago
In 50 years will you buy Tesla out of obligation to your elders with Tesla pensions? Or will you buy from a new company with lower prices and better R&D because it doesn’t have pension obligations to pay yet?