Do you have a 401k plan?

beatnic

http://business.time.com/2012/11/28/fiscal-cliff-why-congress-might-have-to-mess-with-the-401k/

raisindot

Trust me, Congress won't change anything with 401k plans. Considering that most Americans are completely ignorant regarding saving for retirement, it makes no sense to take away one of the biggest incentives for people to save for retirement by making employer contributions taxable or removing the tax benefits of saving. What's more likely to happen--and something I would support--is getting rid of the Traditional IRA, which allows people to deduct annual contributions (and pay taxes upon withdrawals), and make the Roth IRA, which can only be funded through after-tax contributions (and whose distributions are tax-free if taken at retirement). I'd also support dramatically raising tax rates on short-term capital gains while keeping long-term rates as they are. That would effectively remove the benefits of day trading, encourage long-term investing in companies rather than harvesting of short term gains, and put the hedge funds and other market gamblers out of business.

Goldy

Very interesting. I dont think I would have a problem with it changing from a no tax to a low tax if it would help solve the issues. But would it really help solve the issues?

phobicsquirrel

phobicsquirrel

btw, I don't have a 401k, my wife does but her company does a great match per dollar. I thought about it but I decided against it.

raisindot

raisindot

phobicsquirrel:

btw, I don't have a 401k, my wife does but her company does a great match per dollar. I thought about it but I decided against it.

Do you mean that your company offers a 401k but you decided not to participate? Is there a particular reason, if you don't mind me asking? I'm in the investment business (not an advisor, and I don't sell plans), and I'm always interesting in knowing why people do or don't participate in a plan.

Goldy

raisindot

Goldy:

Some companies require that a portion be kept in company stock.

Actually, that's not true. In fact, no plan can legally require employees to invest in anything (other than a default choice for participants who don't decide on their own), because not every investment is suitable for every kind of investor. Company stock, for example, may be too risky for retirees, and plans are required to act in the best interests of employees, which means they must offer a variety of investment options at affordable prices that represent a range of risk/return characteristics. Company stock may be one of the options, but it's never the only option. Any company that either requires or pressures participants to invest in company stock is acting in a way that could subject them to participant lawsuits for violating their fiduciary responsibilities.

roxannedetierro

I think there is nothing wrong with ending the tax exemption for 401ks, anyone with the luxury of a 401k is a moderately high income earner compared to everyone else. Democrats want to make everyone dependent on social security for retirement, because that forces higher income earners to bare a bigger tax burden for providing retirement money to everyone else.

beatnic

roxannedetierro:

I think there is nothing wrong with ending the tax exemption for 401ks, anyone with the luxury of a 401k is a moderately high income earner compared to everyone else. Democrats want to make everyone dependent on social security for retirement, because that forces higher income earners to bare a bigger tax burden for providing retirement money to everyone else.

Welcome to the forum. Your first post on the board is political? Not cigar-centric?

kuzi16

roxannedetierro:

I think there is nothing wrong with ending the tax exemption for 401ks, anyone with the luxury of a 401k is a moderately high income earner compared to everyone else. Democrats want to make everyone dependent on social security for retirement, because that forces higher income earners to bare a bigger tax burden for providing retirement money to everyone else.

it is very easy to say that it is ok to raise taxes on someone when that someone is not you.

0patience

kaspera79

Opatience, thank you for responding in almost the same way I would have. I would add that I choose to contribute to a retirement plan at the expense of Not taking vacations, driving my cars for 10+ years, as well as living in a rather frugal manner. My life is far from one of luxury.

Bobbo2009

Roberto99

+1000

Roberto99

phobicsquirrel:

I think the best way would be for the government to offer a type of 401k (like SS) couldn't be mucked with by congress. That way it would be secure.

Unfortunately congress has a terrible track record mucking around with SS.

raisindot

roxannedetierro:

I think there is nothing wrong with ending the tax exemption for 401ks, anyone with the luxury of a 401k is a moderately high income earner compared to everyone else. Democrats want to make everyone dependent on social security for retirement, because that forces higher income earners to bare a bigger tax burden for providing retirement money to everyone else.

On the contrary. The 401(k) plan is absolutely the best retirement saving options for even the lowest paid workers it offers a way for them to automatically contribute to their own retirement (and lower their current overall tax rate) through payroll deductions that they'll likely never notice. These works also benefit from companies that much deductions and from the tax-deferred status of 401ks, so they don't get hit with capital gains taxes every year. In reality, the highest paid workers tend to glean the fewest tax benefits from a 401k because their annual contributions are capped, and if they're in a higher tax bracket when they retire they'll pay a higher tax rate when they start taking mandatory distributions. Also, the highest paid employees tend to receive other kinds of benefits that the 'rank and file' don't, such as deferred compensation plans that end up being worth far more than their 401k plan assets. There's not a single Democrat or Republican who believes that Social Security alone can fund Americans' retirement needs, and Democrats traditionally have been the more vocal advocates of tougher regulations on companies to make sure that 401k plans are protected against the kind of "pension robbing" that many companies did to their traditional defined benefit plans.

Roberto99

raisindot:

roxannedetierro:

I think there is nothing wrong with ending the tax exemption for 401ks, anyone with the luxury of a 401k is a moderately high income earner compared to everyone else. Democrats want to make everyone dependent on social security for retirement, because that forces higher income earners to bare a bigger tax burden for providing retirement money to everyone else.

On the contrary. The 401(k) plan is absolutely the best retirement saving options for even the lowest paid workers it offers a way for them to automatically contribute to their own retirement (and lower their current overall tax rate) through payroll deductions that they'll likely never notice. These works also benefit from companies that much deductions and from the tax-deferred status of 401ks, so they don't get hit with capital gains taxes every year. In reality, the highest paid workers tend to glean the fewest tax benefits from a 401k because their annual contributions are capped, and if they're in a higher tax bracket when they retire they'll pay a higher tax rate when they start taking mandatory distributions. Also, the highest paid employees tend to receive other kinds of benefits that the 'rank and file' don't, such as deferred compensation plans that end up being worth far more than their 401k plan assets. There's not a single Democrat or Republican who believes that Social Security alone can fund Americans' retirement needs, and Democrats traditionally have been the more vocal advocates of tougher regulations on companies to make sure that 401k plans are protected against the kind of "pension robbing" that many companies did to their traditional defined benefit plans.

A friend of mine and I had a conversation about this general topic several years ago. He was somewhat tongue in cheek but he said that the government will pay out less social security to those who have scrimped and saved with 401k plans and the like. I told him no way that can't possibly happen. He replied that the gov't can find a way to do just about anything it wants. Several years later I was speaking with an attorney about the same issue. He said that he would be more than willing to give up part of his social security if need be. I guess that must be ok for the uber rich, but for the rest of us schmoes... my opinion is that if he wants to give his social security up for someone else ok, but it scares the crap out of me that the gov't could legislate this type of scheme against people who planned for their retirement.

raisindot

Roberto99:

A friend of mine and I had a conversation about this general topic several years ago. He was somewhat tongue in cheek but he said that the government will pay out less social security to those who have scrimped and saved with 401k plans and the like. I told him no way that can't possibly happen. He replied that the gov't can find a way to do just about anything it wants. Several years later I was speaking with an attorney about the same issue. He said that he would be more than willing to give up part of his social security if need be. I guess that must be ok for the uber rich, but for the rest of us schmoes... my opinion is that if he wants to give his social security up for someone else ok, but it scares the crap out of me that the gov't could legislate this type of scheme against people who planned for their retirement.

Your friend is absolutely wrong. There is no correlation at all between the Social Security benefits you earn through the SS taxes you pay over the years and how much you save in a 401k plan. If this were so, the government would have to calculate different individually 401k-adjusted SS payouts for tens of millions of Americans every year, which even this government doesn't have the capacity to do. What is true is that if you are receiving Social Security benefits and your total income (including part-time work and distributions from 401k plans and other retirement and non-retirement income sources) pushes you into a higher tax bracket, you may end up paying more taxes on this income. Another reason why the very rich benefit less from 401k plans than lower-income people whose annual income will probably be less when they retire. Congress may choose to adjust SS benefits by raising the retirement age or adjusting benefit increases to more realistic increases, but there's absolutely no correlation between the SS benefits you receive and how much your 401k is ultimately worth. Anyone who is working and doesn't participate in a 401k plan is seriously jeopardizing their future retirement security.

stephen_hannibal

raisindot

jthanatos

fla-gypsy

My company is only matching .10 on the dollar but that is an automatic 10% return and I get to direct all the investments from a wide choice of funds. I contribute the max they will match without fail and the govt. needs to keep their filthy hands off of it!

Roberto99

raisindot:

Roberto99:

A friend of mine and I had a conversation about this general topic several years ago. He was somewhat tongue in cheek but he said that the government will pay out less social security to those who have scrimped and saved with 401k plans and the like. I told him no way that can't possibly happen. He replied that the gov't can find a way to do just about anything it wants. Several years later I was speaking with an attorney about the same issue. He said that he would be more than willing to give up part of his social security if need be. I guess that must be ok for the uber rich, but for the rest of us schmoes... my opinion is that if he wants to give his social security up for someone else ok, but it scares the crap out of me that the gov't could legislate this type of scheme against people who planned for their retirement.

Your friend is absolutely wrong. There is no correlation at all between the Social Security benefits you earn through the SS taxes you pay over the years and how much you save in a 401k plan. If this were so, the government would have to calculate different individually 401k-adjusted SS payouts for tens of millions of Americans every year, which even this government doesn't have the capacity to do. What is true is that if you are receiving Social Security benefits and your total income (including part-time work and distributions from 401k plans and other retirement and non-retirement income sources) pushes you into a higher tax bracket, you may end up paying more taxes on this income. Another reason why the very rich benefit less from 401k plans than lower-income people whose annual income will probably be less when they retire. Congress may choose to adjust SS benefits by raising the retirement age or adjusting benefit increases to more realistic increases, but there's absolutely no correlation between the SS benefits you receive and how much your 401k is ultimately worth. Anyone who is working and doesn't participate in a 401k plan is seriously jeopardizing their future retirement security.

My friend was commenting on a possible future not the current situation.

ENFIDL

Matt Damon!!!

raisindot

Roberto99:

My friend was commenting on a possible future not the current situation.

Speculations of the uninformed should never be used as the basis for making critical decisions today. I could predict that in the future a meteor will hit Earth and thus saving for a 401k isn't worth the time. I could predict that the government is someday going to tax the rich at 100% and use that money to give everyone a secure retirement so we won't need 401k plans. I could predict that the Chinese will invade the US at some point, enslaving all of us and taking away our retirement money. Any of these scenarios are far more likely to happen than the government creating customized SS payouts for people based on what they've saved on their own.

Roberto99

ENFIDL:

Matt Damon!!!

Ha,Ha!! Hey brother haven't seen you around here lately. No, it's not Matt, though he does look a little like him

Roberto99

raisindot

My comment wasn't directed at you, but more in general at the dangers of basing important life decisions on speculations of what might or might not happen someday. I personally do not believe that the SS fund will ever go to zero. There is such a high level of expectation among Americans that eventually both parties will agree on a plan to keep it solvent. This will probably involve either raising the retirement age, raising SS taxes, adjusting increases to index to something other than inflation, or reducing or eliminating or putting a time limit on certain kinds of benefits (such as disability or survivorship benefits). BTW, if it makes you feel better, you cannot get social security disability benefits of any kind unless you have paid something into the system, as measured by SS credits. For example, if you're under age 24, you must have earned at least six SS credits (each credit is valued at $1,130 of earnings) over the past three years to qualify; the minimum number of credits rises over time. But, yes, there is plenty of abuse of this system. The wife of someone I know is currently receiving SS disability benefits due to chronic pain related to a so-called neurological disorder. This same woman now teaches spinning classes and gets paid under the table. It would be nice if there were a way to 'drop a dime' on such people.

jthanatos

raisindot:

But, yes, there is plenty of abuse of this system. The wife of someone I know is currently receiving SS disability benefits due to chronic pain related to a so-called neurological disorder. This same woman now teaches spinning classes and gets paid under the table. It would be nice if there were a way to 'drop a dime' on such people.

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