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There’s been only garbage replies to your question, which is really unfortunate. In reality, we aren’t that far away from being able to do this. If you are a

by OldHand2018 6y ago

There’s been only garbage replies to your question, which is really unfortunate. In reality, we aren’t that far away from being able to do this. If you are a 1099/gig worker and file your taxes with a schedule C, you’re almost certainly eligible for a SEP-IRA (1). This is way better than a 401k; you can contribute up to 25% of your income (max $57k per year) pretax with all the same investment options as any other retirement plan. Sure, it could be made easier to setup, but it’s been around forever and works. What we need to do is say that if you have an employer who does not provide a [baseline] retirement plan, you are eligible for the SEP-IRA on all income from that employer. The Covid-19 relief legislation established unemployment assistance for 1099/gig workers with federal backing and administered by the states. This should be kept around, improved, and made sustainable (add a line to the Schedule SE for paying the same kind of unemployment taxes that businesses pay on behalf of employees). Obamacare allowed for association-based health plans and the Trump administration approved one of them. I don’t recall the details or the current status, but that’s a start in the right direction. Employers pay a lot of money for health plans and their size allows them to negotiate better deals. We need that leverage outside of employers and plenty of other improvements, but at least we have the basics. This is achievable! (1) https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-establish-a-sep https://www.irs.gov/retirement-plans/retirement-plans-faqs-r...

dillondoyle 6y ago
What is the average yearly take home of people working multiple part-time jobs though? Most people live bill to bill, probably more-so those less advantaged. How many would really be able and or willing to save like that? Isn't the more simple answer getting rid of this crazy system and profit incentives by nationalizing healthcare?
- OldHand2018 6y ago
  There is nothing simple. You just have to accept this. It’s really appealing to create the perfect system, but it is just not going to happen. I’m sorry. It’s not going to happen.
  - bumby 6y ago
    For every complex problem there is an answer that is clear, simple and wrong. H. L. Mencken
pmiller2 6y ago
Even just eliminating the whole 401(k) shit show by converting them to IRAs and raising the contribution limits for IRAs to ~$25k (roughly the sum total of what a W2 employee can contribute to an IRA + 401(k) combined) would solve the retirement account problem fairly efficiently. I'd be willing to bet that could be accomplished with approximately a page or two of legislation. Edit: The problem is "lack of political will," i.e.. lack of people or corporations willing to hire lobbyists to make it happen. Edit 2: While we're at it, why not just let everybody make Roth contributions, at least up to the amount one could contribute to an IRA? Let's just get rid of the whole "backdoor Roth" shenanigans and let people contribute directly.
- ghaff 6y ago
  There's been the virtual elimination of new private sector defined benefit pensions. Which isn't even entirely a bad thing. Leaving aside issues of benefits being cut in some cases, it was always a system that was designed around people staying decade+ in the same job. And between that and SS in the US, people didn't have much choice for a huge chunk of their savings. The problems is the various defined contribution schemes were never introduced in a systematic way as you say. 401(k)'s history is particularly unplanned.
- ryandrake 6y ago
  Just a nit pick: The limit on total employer and employee contributions to a 401(k) is $58,000 in 2021, which includes the $19,500 elective deferral, employer matches, and post-tax contributions. If the "401(k) shit show" was eliminated, I'd hope it would be replaced with similar contribution limits. To your point about backdoor Roth shenanigans, they aren't really shenanigans, they are legit and IRS-sanctioned. Shenanigans kind of implies you're doing something morally questionable.
  - pmiller2 6y ago
    Fair point. Raising the total contribution limit from all sources to $58k + $6k, without differentiating between individual and other contributions would totally make sense. It's an implementation detail, but a significant one, to be sure. :-)
jschwartzi 6y ago
The other component is decoupling health care and dental insurance from employment. Because that's a far bigger problem than retirement. A lot of people lost their jobs last year and suddenly had to pay full price on their insurance to keep going to their doctor. The whole insurance system in the US is best described as a real-life re-enactment of The Trial by Franz Kafka.
- ghaff 6y ago
  Dental insurance isn't really insurance. It's a benefit that exists mostly because it's tax advantaged. [1] Health insurance is, of course, really insurance. With Obamacare the biggest issue is probably that it's really expensive to pay for a good insurance plan (or even a not so good insurance plan) on your own. Though, honestly, not so cheap even with employer participation. [1] By not really insurance, I mean that most people with it (especially older people) may consider it a nice perk but it doesn't really protect them from out-of-pockets they can't afford.
lotsofpulp 6y ago
> If you are a 1099/gig worker and file your taxes with a schedule C, you’re almost certainly eligible for a SEP-IRA (1). This is way better than a 401k Not if your spouse works for an employer that offers a 401k.
- sokoloff 6y ago
  > Not if your spouse works for an employer that offers a 401k. Do you have a citation for this? I'll offer a citation from the IRS that strongly suggests (though does not 100% prove) this is not the case: "Can I set up a SEP for my self-employment income if I participate in my employer's retirement plan? Yes, you can set up a SEP for your self-employed business even if you participate in your employer's retirement plan at a second job." That suggests that you can contribute to a SEP even if you yourself are participating in a 401K, let alone if your spouse is merely offered one. [0] https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-establish-a-sep https://www.irs.gov/retirement-plans/retirement-plans-faqs-r...
  - lotsofpulp 6y ago
    You are correct, I was misinformed. https://www.irs.gov/publications/p560#en_US_2019_publink10008830 https://www.irs.gov/publications/p560#en_US_2019_publink1000... It seems only people who are employed by employers that don't offer 401k get screwed if the spouse does have a 401k and you're over certain incomes: https://www.irs.gov/publications/p590a https://www.irs.gov/publications/p590a

dillondoyle 6y ago

What is the average yearly take home of people working multiple part-time jobs though? Most people live bill to bill, probably more-so those less advantaged. How many would really be able and or willing to save like that? Isn't the more simple answer getting rid of this crazy system and profit incentives by nationalizing healthcare?

OldHand2018 6y ago
There is nothing simple. You just have to accept this. It’s really appealing to create the perfect system, but it is just not going to happen. I’m sorry. It’s not going to happen.
- bumby 6y ago
  For every complex problem there is an answer that is clear, simple and wrong. H. L. Mencken

pmiller2 6y ago

Even just eliminating the whole 401(k) shit show by converting them to IRAs and raising the contribution limits for IRAs to ~$25k (roughly the sum total of what a W2 employee can contribute to an IRA + 401(k) combined) would solve the retirement account problem fairly efficiently. I'd be willing to bet that could be accomplished with approximately a page or two of legislation. Edit: The problem is "lack of political will," i.e.. lack of people or corporations willing to hire lobbyists to make it happen. Edit 2: While we're at it, why not just let everybody make Roth contributions, at least up to the amount one could contribute to an IRA? Let's just get rid of the whole "backdoor Roth" shenanigans and let people contribute directly.

ghaff 6y ago
There's been the virtual elimination of new private sector defined benefit pensions. Which isn't even entirely a bad thing. Leaving aside issues of benefits being cut in some cases, it was always a system that was designed around people staying decade+ in the same job. And between that and SS in the US, people didn't have much choice for a huge chunk of their savings. The problems is the various defined contribution schemes were never introduced in a systematic way as you say. 401(k)'s history is particularly unplanned.
ryandrake 6y ago
Just a nit pick: The limit on total employer and employee contributions to a 401(k) is $58,000 in 2021, which includes the $19,500 elective deferral, employer matches, and post-tax contributions. If the "401(k) shit show" was eliminated, I'd hope it would be replaced with similar contribution limits. To your point about backdoor Roth shenanigans, they aren't really shenanigans, they are legit and IRS-sanctioned. Shenanigans kind of implies you're doing something morally questionable.
- pmiller2 6y ago
  Fair point. Raising the total contribution limit from all sources to $58k + $6k, without differentiating between individual and other contributions would totally make sense. It's an implementation detail, but a significant one, to be sure. :-)

jschwartzi 6y ago

The other component is decoupling health care and dental insurance from employment. Because that's a far bigger problem than retirement. A lot of people lost their jobs last year and suddenly had to pay full price on their insurance to keep going to their doctor. The whole insurance system in the US is best described as a real-life re-enactment of The Trial by Franz Kafka.

ghaff 6y ago
Dental insurance isn't really insurance. It's a benefit that exists mostly because it's tax advantaged. [1] Health insurance is, of course, really insurance. With Obamacare the biggest issue is probably that it's really expensive to pay for a good insurance plan (or even a not so good insurance plan) on your own. Though, honestly, not so cheap even with employer participation. [1] By not really insurance, I mean that most people with it (especially older people) may consider it a nice perk but it doesn't really protect them from out-of-pockets they can't afford.

lotsofpulp 6y ago

> If you are a 1099/gig worker and file your taxes with a schedule C, you’re almost certainly eligible for a SEP-IRA (1). This is way better than a 401k Not if your spouse works for an employer that offers a 401k.

sokoloff 6y ago
> Not if your spouse works for an employer that offers a 401k. Do you have a citation for this? I'll offer a citation from the IRS that strongly suggests (though does not 100% prove) this is not the case: "Can I set up a SEP for my self-employment income if I participate in my employer's retirement plan? Yes, you can set up a SEP for your self-employed business even if you participate in your employer's retirement plan at a second job." That suggests that you can contribute to a SEP even if you yourself are participating in a 401K, let alone if your spouse is merely offered one. [0] https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-establish-a-sep https://www.irs.gov/retirement-plans/retirement-plans-faqs-r...
- lotsofpulp 6y ago
  You are correct, I was misinformed. https://www.irs.gov/publications/p560#en_US_2019_publink10008830 https://www.irs.gov/publications/p560#en_US_2019_publink1000... It seems only people who are employed by employers that don't offer 401k get screwed if the spouse does have a 401k and you're over certain incomes: https://www.irs.gov/publications/p590a https://www.irs.gov/publications/p590a