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Hey everyone: stop talking about your compliant tax strategies! It’s been nice to want to help people but now, obviously, too many people know of some and thei

Hey everyone: stop talking about your compliant tax strategies! It’s been nice to want to help people but now, obviously, too many people know of some and their representatives are changing the laws. It’s back to the way it’s always been: if you can afford good lawyers then you get to know of obscure tax codes. Lets leave it that way.

sokoloff 5y ago
The modern 401(k) practices emerged from one of these then-obscure tax codes, which I view as an unabashedly good outcome.
- javert 5y ago
  Nah, the 401(k) system is a mechanism of wealth extraction for white collar government-adjacent workers. It's a form of repression. I'd rather be building something than dealing with tax, but I'm very much incentivized to do the latter (though your situation may differ).
  - ClumsyPilot 5y ago
    Repression is criminalisation of Solidarity Strikes, entrenching corporate power. Everything else is a waste of time, plastic straw ban of lawmaking. https://en.m.wikipedia.org/wiki/Solidarity_action https://en.m.wikipedia.org/wiki/Solidarity_action
    - throwaway210222 5y ago
      This only works if the employers don't see it coming. In many countries (like mine) organised labour has a wage negotiation-followed-by-industry-wide-strike season. Every year, come rain or shine. Industry has long responded by: a) adjusting their 'final price' to accommodate the theatre b) automating whatever they can c) scheduling plant maintenance d) learning which jobs can be eliminated and doing so. All without paying a cent in wages. Since they seldom get all this done inside 6 weeks, its takes the labourers years to recover even a 5% increase. Many (mining, paper, logging, hospitals) even budget for it.
  - ravenstine 5y ago
    It is pretty much designed to dump money into the stock market in a magnitude that wouldn't occur naturally. As with ETFs, people are indiscriminately tossing money at investments they have no idea of (under the premise that roboinvestors will take care of everything). I am skeptical that this will work out in the long run, or that the government won't someday find ways to confiscate fractions of 401ks because reasons. People don't want to hear this because 401ks are silver bullets, and we are all inclined to desire silver bullets over applying rigor. Most people have no idea what part of their paycheck is invested in. Why do we let them lecture us on where to hold and grow our wealth? That's not to say that 401ks in and of themselves are bad. Their existence doesn't mean that people shouldn't take their own risks and hold assets that keep their wealth liquid rather than locking it up. Personally, I prefer paying more in order to have liquidity. Many would disagree with that. But truth be told, no one knows any one answer that applies to all.
- the_optimist 5y ago
  The modern 401k laws are a giveaway to the financial industry. They stipulate extraordinary restrictions on what investors can/must _invest_ in and fundamentally transfer tremendous economic power and influence to “advisors” and the financiers attached to them.
  - lastofthemojito 5y ago
    The popularization of 401(k) plans (as well as 529 college savings plans, etc) got Main Street on the same page as Wall Street. My parents couldn't have cared less if the stock market tanked. Dad's retirement was a traditional pension, and their savings was in a money market account. Now if the stock market tanks, I watch my retirement account and the kid's college savings plan tank with it. Now that so many of us are participating in the stock market (in one way or another), we're more likely to support policies that Wall Street tells us will keep the market booming. Wall Street won by winning over Main Street.
    - ghaff 5y ago
      The alternative perspective on that is that "Main Street" got to collect its interest payments from the local Savings & Loan or from US Government Savings Bonds while Wall Street did whatever fancy stuff it did with exotic investments like equities--which were mostly gated by expensive full-service brokers and other financial people.
    - the_optimist 5y ago
      This is true. It does align risks much better in the sense that US unions have always been far more antagonist, hyberbolic, and aggressive than their foreign counterparts, which lead to severe impairment/destruction once the protected industries they existed in were exposed to foreign competition. The most powerful unions now, of course, are the public sector unions, which have a similarly deleterious effect but are immune to competition, direct and indirect.
  - sokoloff 5y ago
    While what you say is true, I think this is something like 7 parts benefit to tens of millions of W-2 employees and 1 part benefit to a much smaller number of financial industry workers. I wouldn’t want to give up the 7 to prevent the 1.
- ghaff 5y ago
  >I view as an unabashedly good outcome Possibly. I can't complain personally, The shift from defined benefit to defined contribution retirement savings has probably been generally positive for those with the ability/discipline to take full advantage of 401(k)/IRA. The flipside is that relatively few people (mostly public sector) in the US now get a more or less automatic defined retirement payout from a pension. Of course, the shift isn't just tax code changes. Traditional pensions also largely encoded long-term employment with a single organization.
- wahern 5y ago
  401(k)'s started to became popular in the 1970s because they allowed management to increase their tax-advantaged compensation relative to labor, whereas defined-benefit plans had stricter and more effective rules regarding management/labor compensation disparities. Then during the 1980s as corporate accounting schemes became more sophisticated preference for 401(k)'s and other defined-contribution plans exploded because of how liabilities are calculated. In every conceivable measure pensions are theoretically better for workers and society as a whole. I say theoretically because that's predicated on employers and pension funds (if employer managed) obeying good (translation: dead simple) accounting practices rather than spending all their time and effort figuring out how to subvert them in order to cook their balance sheets to increase their yearly bonuses. Many corporate merger waves since the 1980s have been driven by schemes to drain pension funds (cost "synergies"), and of course states are notorious for failing to fully fund pensions on a YtoY basis (states, unlike corporations, aren't actually required to fully fund pensions[1]). All of these downsides to pensions can be easily remedied. But corporate interests have succeeded in selling the narrative that pensions are unreliable and inequitable, while 401(k)'s are more reliable and equitable. In fact pensions are categorically more equitable, and any less reliability (which is a dubious claim, notwithstanding the many high profile pension failures over the years--nobody reports on someone's 401(k) fund vanishing during a recession) is a consequence of lobbyists phenomenal success in killing legislation and enforcement efforts responsive to corporate financial accounting schemes. Overall reliability of private retirement systems has fallen over the past 40 years, but the decline for pensions was more precipitous simply because they were so damned good before CFO offices became profit centers. Life insurance markets were once dens of fraud and outright thievery, the mortgage backed securities and CDOs of the late 19th and early 20th century. Relatively simple reforms restored the market to nearly unassailable reliability. Though, I suspect the necessary legislation only succeeded after life insurance stopped being the center of growth and profit for financial markets. Legislation regarding private retirement plans likely will only ever make substantial reform once corporations have finished exploiting all opportunities for subverting employee income disparity and asset protections, finally shifting their attention elsewhere. [1] "Fully fund" does not mean paying in the entirety of a worker's expected retirement disbursements. Rather, it means ensuring that each and every year you pay the full fractional share of expected liabilities. Basically the same thing an individual is expected to do when managing their 401(k) contributions.
- vmception 5y ago
  > The modern 401(k) practices emerged from one of these then-obscure tax codes, which I view as an unabashedly good outcome. That's exhibit A of what I'm talking about! This is an article about IRAs being heavily restricted, 401k's are in the same 400-section of the tax code. IRAs are subsection 408, 401k's are subsection 401(k). Literally just stop talking about it, stop trying to get a personal finance blog going, stop trying to get youtube views funnelled over to a personal finance discord server, just let unaware people run around like chickens with their heads cut off because when you tell them whatsup they try to get the laws changed when they fail to take advantage of it adequately Ignorance is bliss and convenient, this is where we are. Just get the tax breaks you have because of your superior reading comprehension skills and eventually your ability to outsource and augment those skills to experienced lawyers and accountants with the same skills.

sokoloff 5y ago

The modern 401(k) practices emerged from one of these then-obscure tax codes, which I view as an unabashedly good outcome.

javert 5y ago
Nah, the 401(k) system is a mechanism of wealth extraction for white collar government-adjacent workers. It's a form of repression. I'd rather be building something than dealing with tax, but I'm very much incentivized to do the latter (though your situation may differ).
- ClumsyPilot 5y ago
  Repression is criminalisation of Solidarity Strikes, entrenching corporate power. Everything else is a waste of time, plastic straw ban of lawmaking. https://en.m.wikipedia.org/wiki/Solidarity_action https://en.m.wikipedia.org/wiki/Solidarity_action
  - throwaway210222 5y ago
    This only works if the employers don't see it coming. In many countries (like mine) organised labour has a wage negotiation-followed-by-industry-wide-strike season. Every year, come rain or shine. Industry has long responded by: a) adjusting their 'final price' to accommodate the theatre b) automating whatever they can c) scheduling plant maintenance d) learning which jobs can be eliminated and doing so. All without paying a cent in wages. Since they seldom get all this done inside 6 weeks, its takes the labourers years to recover even a 5% increase. Many (mining, paper, logging, hospitals) even budget for it.
- ravenstine 5y ago
  It is pretty much designed to dump money into the stock market in a magnitude that wouldn't occur naturally. As with ETFs, people are indiscriminately tossing money at investments they have no idea of (under the premise that roboinvestors will take care of everything). I am skeptical that this will work out in the long run, or that the government won't someday find ways to confiscate fractions of 401ks because reasons. People don't want to hear this because 401ks are silver bullets, and we are all inclined to desire silver bullets over applying rigor. Most people have no idea what part of their paycheck is invested in. Why do we let them lecture us on where to hold and grow our wealth? That's not to say that 401ks in and of themselves are bad. Their existence doesn't mean that people shouldn't take their own risks and hold assets that keep their wealth liquid rather than locking it up. Personally, I prefer paying more in order to have liquidity. Many would disagree with that. But truth be told, no one knows any one answer that applies to all.
the_optimist 5y ago
The modern 401k laws are a giveaway to the financial industry. They stipulate extraordinary restrictions on what investors can/must _invest_ in and fundamentally transfer tremendous economic power and influence to “advisors” and the financiers attached to them.
- lastofthemojito 5y ago
  The popularization of 401(k) plans (as well as 529 college savings plans, etc) got Main Street on the same page as Wall Street. My parents couldn't have cared less if the stock market tanked. Dad's retirement was a traditional pension, and their savings was in a money market account. Now if the stock market tanks, I watch my retirement account and the kid's college savings plan tank with it. Now that so many of us are participating in the stock market (in one way or another), we're more likely to support policies that Wall Street tells us will keep the market booming. Wall Street won by winning over Main Street.
  - ghaff 5y ago
    The alternative perspective on that is that "Main Street" got to collect its interest payments from the local Savings & Loan or from US Government Savings Bonds while Wall Street did whatever fancy stuff it did with exotic investments like equities--which were mostly gated by expensive full-service brokers and other financial people.
  - the_optimist 5y ago
    This is true. It does align risks much better in the sense that US unions have always been far more antagonist, hyberbolic, and aggressive than their foreign counterparts, which lead to severe impairment/destruction once the protected industries they existed in were exposed to foreign competition. The most powerful unions now, of course, are the public sector unions, which have a similarly deleterious effect but are immune to competition, direct and indirect.
- sokoloff 5y ago
  While what you say is true, I think this is something like 7 parts benefit to tens of millions of W-2 employees and 1 part benefit to a much smaller number of financial industry workers. I wouldn’t want to give up the 7 to prevent the 1.
ghaff 5y ago
>I view as an unabashedly good outcome Possibly. I can't complain personally, The shift from defined benefit to defined contribution retirement savings has probably been generally positive for those with the ability/discipline to take full advantage of 401(k)/IRA. The flipside is that relatively few people (mostly public sector) in the US now get a more or less automatic defined retirement payout from a pension. Of course, the shift isn't just tax code changes. Traditional pensions also largely encoded long-term employment with a single organization.
wahern 5y ago
401(k)'s started to became popular in the 1970s because they allowed management to increase their tax-advantaged compensation relative to labor, whereas defined-benefit plans had stricter and more effective rules regarding management/labor compensation disparities. Then during the 1980s as corporate accounting schemes became more sophisticated preference for 401(k)'s and other defined-contribution plans exploded because of how liabilities are calculated. In every conceivable measure pensions are theoretically better for workers and society as a whole. I say theoretically because that's predicated on employers and pension funds (if employer managed) obeying good (translation: dead simple) accounting practices rather than spending all their time and effort figuring out how to subvert them in order to cook their balance sheets to increase their yearly bonuses. Many corporate merger waves since the 1980s have been driven by schemes to drain pension funds (cost "synergies"), and of course states are notorious for failing to fully fund pensions on a YtoY basis (states, unlike corporations, aren't actually required to fully fund pensions[1]). All of these downsides to pensions can be easily remedied. But corporate interests have succeeded in selling the narrative that pensions are unreliable and inequitable, while 401(k)'s are more reliable and equitable. In fact pensions are categorically more equitable, and any less reliability (which is a dubious claim, notwithstanding the many high profile pension failures over the years--nobody reports on someone's 401(k) fund vanishing during a recession) is a consequence of lobbyists phenomenal success in killing legislation and enforcement efforts responsive to corporate financial accounting schemes. Overall reliability of private retirement systems has fallen over the past 40 years, but the decline for pensions was more precipitous simply because they were so damned good before CFO offices became profit centers. Life insurance markets were once dens of fraud and outright thievery, the mortgage backed securities and CDOs of the late 19th and early 20th century. Relatively simple reforms restored the market to nearly unassailable reliability. Though, I suspect the necessary legislation only succeeded after life insurance stopped being the center of growth and profit for financial markets. Legislation regarding private retirement plans likely will only ever make substantial reform once corporations have finished exploiting all opportunities for subverting employee income disparity and asset protections, finally shifting their attention elsewhere. [1] "Fully fund" does not mean paying in the entirety of a worker's expected retirement disbursements. Rather, it means ensuring that each and every year you pay the full fractional share of expected liabilities. Basically the same thing an individual is expected to do when managing their 401(k) contributions.
vmception 5y ago
> The modern 401(k) practices emerged from one of these then-obscure tax codes, which I view as an unabashedly good outcome. That's exhibit A of what I'm talking about! This is an article about IRAs being heavily restricted, 401k's are in the same 400-section of the tax code. IRAs are subsection 408, 401k's are subsection 401(k). Literally just stop talking about it, stop trying to get a personal finance blog going, stop trying to get youtube views funnelled over to a personal finance discord server, just let unaware people run around like chickens with their heads cut off because when you tell them whatsup they try to get the laws changed when they fail to take advantage of it adequately Ignorance is bliss and convenient, this is where we are. Just get the tax breaks you have because of your superior reading comprehension skills and eventually your ability to outsource and augment those skills to experienced lawyers and accountants with the same skills.