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I really don't understand what people think when they choose to ignore retirement contributions. What do they think is going to happen when they get old? Seriou

by papito 5y ago

I really don't understand what people think when they choose to ignore retirement contributions. What do they think is going to happen when they get old? Seriously, what to they expect to happen? A Government man showing up at their doorstep with a fat suitcase filled with dollars? Also, IRA, SHMAYARAY. Max out your Roth every year, and then do whatever. I don't see how the taxes for the rest of us are going to go down with the aging population.

xf1cf 5y ago
You're missing the point of the pension and social security. There are, and has always, been a large portion of society making "just enough". Maxing out your 401k requires 19,500 dollars of pre-tax income you can dump into an account you can't touch. A little less with a match. So do the math: Median income in 2019: $65,712. $19,500 is almost 30% of your pre-tax income. Not a whole lot left to save for a house, buy a (old, used) car, or any number of other things. I say pre-tax because the situation is even more bleak if you look at roth post-tax. After contributing to your 401k as above your remaining take home after taxes (assuming you do not pay state taxes) is $23635. So you max out your IRA at $6,000. Now you have $17,635 to live on. Almost nothing. Maybe in the 90s this would've worked but even in my low CoL town renting an apartment will still run you $1,100 for a single room 600 square foot shack. You could do it, but you would be living on ramen and beans towards the end of the year assuming there weren't any medical emergencies, car problems, or any number of other things that could effect you (rising food costs, gas prices, electrical costs in summer, etc). The purpose of a pension is that it provides a simple, easy, and guaranteed retirement plan for people in this situation. They can't afford to utilize their 401k for maximum benefit, and they can't afford to utilize an IRA to it's maximum benefit. 401ks were one of the greatest magic tricks ever pulled on Americans. While I agree they're great if you have the extra income, they do a lot of damage to the retirements of people who cannot afford them.
gizmo686 5y ago
Relying on pensions is not ignoring retirement. It is assuming that you will receive the benefit you were promised as part of your compensation. Not getting your promised pension is the same as your 401k balance being confiscated by your broker to cover for their own financial shortfall. The main difference is that the 401k is a much more transparent product, so this outright theft is not as possible. The flip side of that is that your exposure to the market is more direct (which may not be that much of a flipside, as pension funds are still exposed to the market, but that exposure is more obscured). > I don't see how the taxes for the rest of us are going to go down with the aging population. Who says taxes are going to go down? Reading the political winds, the grass roots support for raising taxes is the highest I have ever seen it, and seems to be growing. We are leaving the political era of low taxes independent of the actual fiscal need to raise them.
- bradleyjg 5y ago
  Employers going bankrupt was always a risk. Why didn’t their elected collective bargaining representatives negotiate for an independently administered, fully funded, bankruptcy remote pension investment vehicle?
cortesoft 5y ago
That is not what this article is about. These people took jobs that HAD defined pension plans. They took the jobs based on those promised pensions, and planned their savings around the amounts promised. Then, the pensions went bankrupt and failed to pay what they promised. This is not people failing to plan for the future. This is people having what is promised them revoked.
- papito 5y ago
  Yeah, I get it. My comment was off-topic for the article, but I just decided to go on a general retirement saving rant.
- base698 5y ago
  Crypto people have a saying: not your keys, not your coins. It applies in more than just crypto. Can't squeeze blood from a turnip.
ralph84 5y ago
I think you're a tad too optimistic congress won't find ways to tax Roth distributions. It's easy to imagine a future with a higher age for qualified distributions and/or distributions over $x or from an account with a balance over $y being classified as non-qualified. $x and $y will of course be chosen to appear to target the "rich", while mostly hitting the middle and upper middle class, just like AMT, the SALT deduction cap, and other "tax reforms".
- papito 5y ago
  Well, considering that shitbags like Peter Thiel found ways to make BILLIONS in their Roth (as if Roth was created as a tax haven for the ultra-rich), it will be a tad hard for the donor class I mean Congress to write Roth-taxing laws without screwing themselves.

by papito 5y ago

xf1cf 5y ago

You're missing the point of the pension and social security. There are, and has always, been a large portion of society making "just enough". Maxing out your 401k requires 19,500 dollars of pre-tax income you can dump into an account you can't touch. A little less with a match. So do the math: Median income in 2019: $65,712. $19,500 is almost 30% of your pre-tax income. Not a whole lot left to save for a house, buy a (old, used) car, or any number of other things. I say pre-tax because the situation is even more bleak if you look at roth post-tax. After contributing to your 401k as above your remaining take home after taxes (assuming you do not pay state taxes) is $23635. So you max out your IRA at $6,000. Now you have $17,635 to live on. Almost nothing. Maybe in the 90s this would've worked but even in my low CoL town renting an apartment will still run you $1,100 for a single room 600 square foot shack. You could do it, but you would be living on ramen and beans towards the end of the year assuming there weren't any medical emergencies, car problems, or any number of other things that could effect you (rising food costs, gas prices, electrical costs in summer, etc). The purpose of a pension is that it provides a simple, easy, and guaranteed retirement plan for people in this situation. They can't afford to utilize their 401k for maximum benefit, and they can't afford to utilize an IRA to it's maximum benefit. 401ks were one of the greatest magic tricks ever pulled on Americans. While I agree they're great if you have the extra income, they do a lot of damage to the retirements of people who cannot afford them.

gizmo686 5y ago

Relying on pensions is not ignoring retirement. It is assuming that you will receive the benefit you were promised as part of your compensation. Not getting your promised pension is the same as your 401k balance being confiscated by your broker to cover for their own financial shortfall. The main difference is that the 401k is a much more transparent product, so this outright theft is not as possible. The flip side of that is that your exposure to the market is more direct (which may not be that much of a flipside, as pension funds are still exposed to the market, but that exposure is more obscured). > I don't see how the taxes for the rest of us are going to go down with the aging population. Who says taxes are going to go down? Reading the political winds, the grass roots support for raising taxes is the highest I have ever seen it, and seems to be growing. We are leaving the political era of low taxes independent of the actual fiscal need to raise them.

bradleyjg 5y ago
Employers going bankrupt was always a risk. Why didn’t their elected collective bargaining representatives negotiate for an independently administered, fully funded, bankruptcy remote pension investment vehicle?

cortesoft 5y ago

That is not what this article is about. These people took jobs that HAD defined pension plans. They took the jobs based on those promised pensions, and planned their savings around the amounts promised. Then, the pensions went bankrupt and failed to pay what they promised. This is not people failing to plan for the future. This is people having what is promised them revoked.

papito 5y ago
Yeah, I get it. My comment was off-topic for the article, but I just decided to go on a general retirement saving rant.
base698 5y ago
Crypto people have a saying: not your keys, not your coins. It applies in more than just crypto. Can't squeeze blood from a turnip.

ralph84 5y ago

I think you're a tad too optimistic congress won't find ways to tax Roth distributions. It's easy to imagine a future with a higher age for qualified distributions and/or distributions over $x or from an account with a balance over $y being classified as non-qualified. $x and $y will of course be chosen to appear to target the "rich", while mostly hitting the middle and upper middle class, just like AMT, the SALT deduction cap, and other "tax reforms".

papito 5y ago
Well, considering that shitbags like Peter Thiel found ways to make BILLIONS in their Roth (as if Roth was created as a tax haven for the ultra-rich), it will be a tad hard for the donor class I mean Congress to write Roth-taxing laws without screwing themselves.