3 ms·

Man 401ks are such a sham imo

kelnos 4y ago
Why would you say that? If you expect your tax bracket to be lower in retirement, then it lets you keep money you'd otherwise have to give to the government. And many employers offer (limited) matching, which is just free money.
- Red_Leaves_Flyy 4y ago
  They feel like a prisoners dilemma to me. Pensions are a relic unless you chose your career wisely and were lucky/related enough to get in. So I’m stuck with whatever crappy 401k my employer provides and I’m hoping that my paltry investments now will support me for 2-3 decades when I’m to infirm to labor? Mind you I’m doing this while paying my criminally expensive (20-40% gross pre tax) health insurance for the privilege of neglecting to get healthcare I desperately need because I can’t afford all the out of pocket expenses required to actually receive the care I need because my employer won’t pay me enough nor will they absorb these costs. Lastly, I’m doing all this while praying that our comatose government won’t completely fuck over even harder while I try to scrimp and save and suffer my bootstraps up to a more than barely surviving state of existence. If by some miracle I survive to retirement and have no 401k (and assuming it would’ve performed well) I’ll be stuck living in a disgusting sro for the destitute. So yeah, they’rea sham to distract us from the fact that social safety nets have evaporated to juice the economy while surpassing the cognitive abilities of an average person.
- hakfoo 4y ago
  It's probably too complex of a product for much of its audience. The whole retirement process is usually presented with little useful guidance. Here's a packet of different investment offerings, many of which are opaque, and plenty are surprisingly inefficient (high fees, excessive turnover). How much should I be contributing? Here's a calculator with confusing and iffy assumptions baked right in! This all but guarantees the house will win in some way-- even if you get a "good" outcome, you're probably not doing absolute optimally and that margin bankrolls it. Actually, I'd like to pull out a little. Investment in general is too complex for most people. My 401(k) using the default "2035 target date" plan I was offered is down 20% over the last year, but it's not like my self-directed investments are doing better. The only thing that's worked out bulletproof has been I-bonds, and I'm afraid I'm not going to get that far on that, with a 10k-per-annum cap. TBH, what I want is a product where I can "prepay" retirement services and have someone else take the economic risks. In a way, defined benefit pensions were sort of like that, but I'd like to be even further decoupled from the dollar. Let me sign up to pay $x,000 per year during my working years, and when I'm 70, I get a paid-for-life furnished condo in (what will by then be) the palm-tree lined beachfront party town of Halifax, Nova Scotia. If the counterparty to the deal is a brilliant dollar jockey and makes 70% a year compounded on my money, good for him and I don't see a cent of it. But if he bets it all on Meta and has to pick up dog droppings to pay for ramen, too bad, he's the one who's gotta pull a housing unit out of his ass in 2050. Put it behind some sort of state backing fund to ensure delivery of goods if you have to. I also suspect the default 401(k) choices tend to reinforce our society's toxic relationship with the stock market. Yeah, there's probably something bond-centric or emerging-market somewhere in the Poorly Printed Menu of Confusing Investment Choices, but mostly, it leads to the narrative of "We have to keep pumping up the S&P 500, and make a bunch of flailing companies trade at a P/E of 73, because Grandpa's portfolio is fundamentally garbage but we feel a social duty to not make him work at McDonald's when he's 89."
  - sokoloff 4y ago
    You can do the income side of that with deferred fixed-income annuity. You won't be happy with the amounts, because you're offloading the economic risk to someone else who will be paid handsomely for taking that on. You'd probably be even less happy with the real-estate side, but I'm sure you can find someone to take the other side of that deal for the right price. (Hell, I'll do it for the right price, but you won't like that price either.)
  - DontchaKnowit 4y ago
    Yeah see and my 401k account is down like 10% net over its lifetime. My personal investments are up like almost 100% over the same period (3 years) its an incredible time to be investing right now because there are a metric fuckload of small cap stocks that are extremely mispriced. See: shipping sector in the last 3 years (dry bulk and lng) This is why 401ks are a total shame. You get marginal, if any tax benefits (entirely possible you pay significantly more tax when all is said and done), your money is in jail for your entire fucjing life so if you have an investment opportunity you won't have the capital to maximize your profit, and to top it off, the investment selections are dogshit broad based funds that almost never even match the s&p 500 and you pay like a 1% management fee for the pleasure of all these lovely features. It's a complete sham and it would take an enormous amount of employer matching to make it worth doing. E.g. an amount that no employer would ever be willing to offer.
- DontchaKnowit 4y ago
  1) in many cases investment options are limited to certain packages. These often suck major ass 2) in many cases there is a 1% + fee which absolutely obliterates your returns over the long run 3) your entire principal + capital gains are taxed as income when you take distributions whereas for an investment outside of 401k your principal gets taxed when you pay income taxes and then capital gains are taxed at a long term rate if you hold long enough, which is way lower than income rate. E.g. you actually kinda get fleeced on taxes too 4) your money is held hostage under threat of 10% penalty for a withdrawal and you have to practically beg for it it is so obnoxious to withdraw. My 401k did like 4 % at a time when the s&p 500 did like 30. That's a straight up scam

Why would you say that? If you expect your tax bracket to be lower in retirement, then it lets you keep money you'd otherwise have to give to the government. And many employers offer (limited) matching, which is just free money.

Red_Leaves_Flyy 4y ago
They feel like a prisoners dilemma to me. Pensions are a relic unless you chose your career wisely and were lucky/related enough to get in. So I’m stuck with whatever crappy 401k my employer provides and I’m hoping that my paltry investments now will support me for 2-3 decades when I’m to infirm to labor? Mind you I’m doing this while paying my criminally expensive (20-40% gross pre tax) health insurance for the privilege of neglecting to get healthcare I desperately need because I can’t afford all the out of pocket expenses required to actually receive the care I need because my employer won’t pay me enough nor will they absorb these costs. Lastly, I’m doing all this while praying that our comatose government won’t completely fuck over even harder while I try to scrimp and save and suffer my bootstraps up to a more than barely surviving state of existence. If by some miracle I survive to retirement and have no 401k (and assuming it would’ve performed well) I’ll be stuck living in a disgusting sro for the destitute. So yeah, they’rea sham to distract us from the fact that social safety nets have evaporated to juice the economy while surpassing the cognitive abilities of an average person.
hakfoo 4y ago
It's probably too complex of a product for much of its audience. The whole retirement process is usually presented with little useful guidance. Here's a packet of different investment offerings, many of which are opaque, and plenty are surprisingly inefficient (high fees, excessive turnover). How much should I be contributing? Here's a calculator with confusing and iffy assumptions baked right in! This all but guarantees the house will win in some way-- even if you get a "good" outcome, you're probably not doing absolute optimally and that margin bankrolls it. Actually, I'd like to pull out a little. Investment in general is too complex for most people. My 401(k) using the default "2035 target date" plan I was offered is down 20% over the last year, but it's not like my self-directed investments are doing better. The only thing that's worked out bulletproof has been I-bonds, and I'm afraid I'm not going to get that far on that, with a 10k-per-annum cap. TBH, what I want is a product where I can "prepay" retirement services and have someone else take the economic risks. In a way, defined benefit pensions were sort of like that, but I'd like to be even further decoupled from the dollar. Let me sign up to pay $x,000 per year during my working years, and when I'm 70, I get a paid-for-life furnished condo in (what will by then be) the palm-tree lined beachfront party town of Halifax, Nova Scotia. If the counterparty to the deal is a brilliant dollar jockey and makes 70% a year compounded on my money, good for him and I don't see a cent of it. But if he bets it all on Meta and has to pick up dog droppings to pay for ramen, too bad, he's the one who's gotta pull a housing unit out of his ass in 2050. Put it behind some sort of state backing fund to ensure delivery of goods if you have to. I also suspect the default 401(k) choices tend to reinforce our society's toxic relationship with the stock market. Yeah, there's probably something bond-centric or emerging-market somewhere in the Poorly Printed Menu of Confusing Investment Choices, but mostly, it leads to the narrative of "We have to keep pumping up the S&P 500, and make a bunch of flailing companies trade at a P/E of 73, because Grandpa's portfolio is fundamentally garbage but we feel a social duty to not make him work at McDonald's when he's 89."
- sokoloff 4y ago
  You can do the income side of that with deferred fixed-income annuity. You won't be happy with the amounts, because you're offloading the economic risk to someone else who will be paid handsomely for taking that on. You'd probably be even less happy with the real-estate side, but I'm sure you can find someone to take the other side of that deal for the right price. (Hell, I'll do it for the right price, but you won't like that price either.)
- DontchaKnowit 4y ago
  Yeah see and my 401k account is down like 10% net over its lifetime. My personal investments are up like almost 100% over the same period (3 years) its an incredible time to be investing right now because there are a metric fuckload of small cap stocks that are extremely mispriced. See: shipping sector in the last 3 years (dry bulk and lng) This is why 401ks are a total shame. You get marginal, if any tax benefits (entirely possible you pay significantly more tax when all is said and done), your money is in jail for your entire fucjing life so if you have an investment opportunity you won't have the capital to maximize your profit, and to top it off, the investment selections are dogshit broad based funds that almost never even match the s&p 500 and you pay like a 1% management fee for the pleasure of all these lovely features. It's a complete sham and it would take an enormous amount of employer matching to make it worth doing. E.g. an amount that no employer would ever be willing to offer.
DontchaKnowit 4y ago
1) in many cases investment options are limited to certain packages. These often suck major ass 2) in many cases there is a 1% + fee which absolutely obliterates your returns over the long run 3) your entire principal + capital gains are taxed as income when you take distributions whereas for an investment outside of 401k your principal gets taxed when you pay income taxes and then capital gains are taxed at a long term rate if you hold long enough, which is way lower than income rate. E.g. you actually kinda get fleeced on taxes too 4) your money is held hostage under threat of 10% penalty for a withdrawal and you have to practically beg for it it is so obnoxious to withdraw. My 401k did like 4 % at a time when the s&p 500 did like 30. That's a straight up scam