4 ms·

It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to ret

It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to retire on, even if you start at age 20 and max it each year till 55… unless the stock market goes up, up, up. One flaw is that you can only contribute that $22k to retirement if you have an employer and that employer offers a 401k plan to employees. Most do, but it also discourages entrepreneurship and gig work (which can be lucrative). Without a 401k, we are limited to contributing $6k/year to an IRA, which only has a tax deduction if you make less than $85k or so per year. Meanwhile 15% or so of our paychecks go towards social security, which many believe won’t exist in 20 years, regardless of contributions you made. Finally, the cost of retiring heavily depends on two things- healthcare and housing. Many Americans remain employed until 65 when they are eligible for Medicare as their employer-provided health insurance is all they can afford. Prior to Obamacare, these individuals would simply be uninsured, but now it’s “insured but it’s ridiculously expensive” without their employer. As for housing… it’s common to sell a single family home for X and use X/Y of that money to buy a smaller townhome or condo to live in until the day you die. This can work out well, adding tens or hundreds of thousands of dollars to the retirement account, but it relies on the person owning the home, having significant equity in the home if it’s not fully paid off, and being willing and able to sell the house and downsize. The system is broken and in this software engineer-heavy forum, I think it’s easy to forget that we make more money than most Americans. Heck, we make more money than most humans.

nradov 3y ago
No one retires at age 55 unless they already have substantial wealth. The expectation is that you continue contributing until you retire at about age 67.
BeetleB 3y ago
> It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to retire on, even if you start at age 20 and max it each year till 55 Over the last 35 years, that would have netted you about $3M in today's dollars. You could argue that's not enough to retire on at 55 (although I'm sure many can), but if you keep it up to 65 that's $6M. Easily enough to retire on.
- symlinkk 3y ago
  Not to mention Social Security kicks in once you hit your 60s.
  - gymbeaux 3y ago
    Is SS in the constitution? Show me where social security payments are an American right guaranteed by the federal government.
- thunky 3y ago
  Right, but that's also assuming the person is 100% invested in the stock market all the way up to their retirement. That's a lot of risk.
  - ska 3y ago
    Sure, but more conservative and balanced approach still puts you in really decent shape. 4mm instead of 6 maybe. So that's not the problem, the problem is with the idea that you start max contribution in your 20s and keep it up. To a first approximation, nobody does this. The real way that people run into trouble with voluntary saving (tax sheltered or no) being relied on is something like this: 20s : bad salary, don't save much 30s : making better money but getting married and having a couple of kids 40s : man those kids are expensive, putting college funds together, saving a little bit. oh well at least we're building house equity. 50s : huh, we should think about saving. finally can live a bit though. 60s : oh crap, no way to catch up
    - hotnfresh 3y ago
      Ding ding ding. We started to hit “we could save enough to retire at 55, or 60 at worst” money just as we started having kids. The added health insurance costs, healthcare costs (and our kids don’t even have any huge problems!), housing costs (unless we’re OK sending them to bad schools), lost wages due to time staying home caring for them, child care costs before they started school, et c… that stuff topped a quarter million before I stopped counting, and it went way higher after that. The kids have gotten somewhat cheaper as they’ve gotten older! But having that ultra-high cost front-loaded cast like a million-plus dollar shadow on our likely at-60 savings (due to opportunity cost), not even counting the ongoing costs and the effects those are having. Retiring at 65 is now iffy…
Kon-Peki 3y ago
> discourages entrepreneurship and gig work (which can be lucrative) Self-employed folks can make both employee and employer contributions to tax-advantaged retirement accounts, and the aggregate yearly amount far exceeds what a W-2 employee can contribute on their own.
- gymbeaux 3y ago
  Depends on how much they make that doesn’t need to go back into the business, but sure. Most startups fail, most don’t turn a profit for several years. I would venture to say most people who skip the 9 to 5 for a few years to pursue their passion return with ~5 years of missed retirement contributions.

nradov 3y ago

No one retires at age 55 unless they already have substantial wealth. The expectation is that you continue contributing until you retire at about age 67.

BeetleB 3y ago

> It’s not over-hyped. If you play around with the numbers, the ~$22k per year (increases a little each year usually) you can put in a 401k is insufficient to retire on, even if you start at age 20 and max it each year till 55 Over the last 35 years, that would have netted you about $3M in today's dollars. You could argue that's not enough to retire on at 55 (although I'm sure many can), but if you keep it up to 65 that's $6M. Easily enough to retire on.

symlinkk 3y ago
Not to mention Social Security kicks in once you hit your 60s.
- gymbeaux 3y ago
  Is SS in the constitution? Show me where social security payments are an American right guaranteed by the federal government.
thunky 3y ago
Right, but that's also assuming the person is 100% invested in the stock market all the way up to their retirement. That's a lot of risk.
- ska 3y ago
  Sure, but more conservative and balanced approach still puts you in really decent shape. 4mm instead of 6 maybe. So that's not the problem, the problem is with the idea that you start max contribution in your 20s and keep it up. To a first approximation, nobody does this. The real way that people run into trouble with voluntary saving (tax sheltered or no) being relied on is something like this: 20s : bad salary, don't save much 30s : making better money but getting married and having a couple of kids 40s : man those kids are expensive, putting college funds together, saving a little bit. oh well at least we're building house equity. 50s : huh, we should think about saving. finally can live a bit though. 60s : oh crap, no way to catch up
  - hotnfresh 3y ago
    Ding ding ding. We started to hit “we could save enough to retire at 55, or 60 at worst” money just as we started having kids. The added health insurance costs, healthcare costs (and our kids don’t even have any huge problems!), housing costs (unless we’re OK sending them to bad schools), lost wages due to time staying home caring for them, child care costs before they started school, et c… that stuff topped a quarter million before I stopped counting, and it went way higher after that. The kids have gotten somewhat cheaper as they’ve gotten older! But having that ultra-high cost front-loaded cast like a million-plus dollar shadow on our likely at-60 savings (due to opportunity cost), not even counting the ongoing costs and the effects those are having. Retiring at 65 is now iffy…

Kon-Peki 3y ago

> discourages entrepreneurship and gig work (which can be lucrative) Self-employed folks can make both employee and employer contributions to tax-advantaged retirement accounts, and the aggregate yearly amount far exceeds what a W-2 employee can contribute on their own.

gymbeaux 3y ago
Depends on how much they make that doesn’t need to go back into the business, but sure. Most startups fail, most don’t turn a profit for several years. I would venture to say most people who skip the 9 to 5 for a few years to pursue their passion return with ~5 years of missed retirement contributions.