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punk rebel ecks posted:I'm a dumb dumb who doesn't know the answer to this. If 401ks are so good, then why doesn't the government issue everyone 401ks instead of social security payments? Reaganism But more seriously, you're mixing concerns. 401ks are defined-contribution plans where you decide how much money you invest, and in what. Social security and pensions are defined-benefit plans which are a whole different animal. It's honestly pretty dumb IMO that 401ks are tied to your employer, which prevents many many Americans from participating in them. But also many Americans can't afford to participate even if they could. It's the whole "personal responsibility" thing compared to a national pension scheme or bolstering SS to be adequate for retirement. Pensions and SS politics aside, it'd be great to just combine the 401k and IRA contribution limits and make it available to everyone regardless of employer. The invention of 401ks was a way to shift responsibility for saving from pension funds to individuals. For wealthy people it's generally a positive. For poorer people it tends to be a negative. If it is "your responsibility" to save for your own retirement and you end up elderly and poor and eating cat food, welp, you should have known better  It's complicated, but basically you have to take ownership of your finances or suffer the consequences because we collectively don't give a poo poo about you 
Guinness fucked around with this message at 20:38 on Feb 10, 2021 |
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Feb 10, 2021 20:27
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punk rebel ecks posted:I'm a dumb dumb who doesn't know the answer to this. If 401ks are so good, then why doesn't the government issue everyone 401ks instead of social security payments? Because we live in a horrible country that wants to support poor people as minimally as possible.
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Feb 10, 2021 20:35
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CubicalSucrose posted:Congrats! Look up "megabackdoor Roth." It's as good as it sounds. Depending on your plan details, you may be limited in the # of times you can move funds from one bucket to another (1 per year is one of the most restrictive I've seen), or you might not. Oh yeah, I know the megabackdoor thing is real, I'm just........surprised there is an option for automatic, daily conversions of all after-tax contributions (and no limit on number of conversions). That part is what sounds too good to be true.
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Feb 10, 2021 20:37
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punk rebel ecks posted:
This is a good find that I’m going to def consider, than you. I currently use the 2% Citi double cash, so it’ll depend on how decent their credit card is I think.
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Feb 10, 2021 20:42
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The government issues (shall issue) everyone a kind of lovely unmatched 401(k) called an IRA. The reason the IRA isn't expanded to $25K with employers contributing matches directly in to the employer IRA has some historical roots in defined contribution plans replacing defined benefit plans (in that much like a defined benefit plan it was tied to a specific employer), but practically the reason that this doesn't happen is because the government wants to tie you to your employer in annoying ways. ROJO posted:Oh yeah, I know the megabackdoor thing is real, I'm just........surprised there is an option for automatic, daily conversions of all after-tax contributions (and no limit on number of conversions). That part is what sounds too good to be true. if a company wants to offer a really good 401(k) they can, easily. (Subject to nondiscrimination testing)
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Feb 10, 2021 20:44
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401k was also a massive handout to the finance/investment industry.
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Feb 10, 2021 20:44
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ROJO posted:Oh yeah, I know the megabackdoor thing is real, I'm just........surprised there is an option for automatic, daily conversions of all after-tax contributions (and no limit on number of conversions). That part is what sounds too good to be true. So rich people and... Basically the IRS said it was OK for the backdoor roth ira people not long ago, and now Fidelity has rolled it into an automatic feature. Make sure you do not exceed that $57k number "from all sources" - this means regular salary deferral ($19,500), matching, profit sharing, after tax deferral, etc. So if you make $100k and they match 10% with true-up you need to include it in your calculations: $57,000 - $19500 - $10000 = Maximum After Tax Contribution. They will not stop you from blowing this out, just at the defined limits of $19,500 and $57k respectively. You also must front-load your regular salary deferral ($19,500) before you gain access to the rest of it. Next payday I will hit the Traditional 401k limit and start in on after tax at a much less breakneck pace spread evenly through most of the year. 
H110Hawk fucked around with this message at 20:47 on Feb 10, 2021 |
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Feb 10, 2021 20:45
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Space Fish posted:So long as indexers have a far-off time horizon for retirement, yeah, they can most likely weather market corrections and crashes and ultimately come out ahead. How is that not low-risk? punk rebel ecks posted:I'm a dumb dumb who doesn't know the answer to this. If 401ks are so good, then why doesn't the government issue everyone 401ks instead of social security payments?
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Feb 10, 2021 20:46
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Duckman2008 posted:Because we live in a horrible country that wants to support poor people as minimally as possible. No. Social Security is a good thing because it can do things that individual savings can't. For instance, if you become disabled a few years into your working life, Social Security can take care of you; your savings can't, because at that point you haven't had time to actually build up your savings yet. You could get separate insurance to cover this situation, but insurance gets better with a larger risk pool and "basically the entire working population" is a drat fine pool to share risk in. 401(k)s and other defined-contribution plans also expose individuals to all kinds of timing risks. If the market takes a poo poo at the wrong time, welp, gg, your retirement's hosed. An ongoing government program with a trust fund and the ability to deficit spend in the worst case is much better positioned to smooth out economic peaks and valleys. Setting aside money for retirement in general is a good thing, but as an individual who's much more concerned about the downside risk of a bad market swing (not having enough to eat and pay bills in retirement) versus the upside potential of the market doing super well (nicer vacations, more money for hobbies or to leave to your heirs) Social Security is preferable to more money in your 401(k).
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Feb 10, 2021 20:47
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Also, remember that privatization of social security was George W. Bush's thing. Just imagine the disaster that would have been come 2007/2008.
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Feb 10, 2021 20:48
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Gazpacho posted:Tax stuff, sigh Thanks for all this, even if you don't do this for a living it's very helpful to hear about the process from someone who went through it.
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Feb 10, 2021 20:50
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ROJO posted:Can someone clear something up for me regarding 401k in-plan conversions to Roth? My 401k is through fidelity, and I have already been maxing out a $19.5k Roth contribution, and get a 10% company match, and am fully-vested in everything. It turns out that our plan recently enabled you to choose automatic, daily, in-plan conversions to Roth for after-tax contributions if I want. Do you use their netbenefits.com site or something else?
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Feb 10, 2021 20:56
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Space Gopher posted:No. Sorry, either I misread the quote or am being misread (or both). I def still want social security. My point is that the country does not do near enough to give everyone access to extra retirement like a 401k. That’s pretty much it. Sorry is I misworded it.
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Feb 10, 2021 20:57
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I wish company 401k plans allowed direct contributions outside of paycheck withholdings. I realize that’d jack with the tax calculations and be a headache for corporate payroll systems, but it’d be nice to fund my 401k and Roth IRA at the same time.
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Feb 10, 2021 20:57
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Guinness posted:
Definitely not why they were invented but it was for sure the unintended end result.
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Feb 10, 2021 20:59
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Residency Evil posted:Also, remember that privatization of social security was George W. Bush's thing. Just imagine the disaster that would have been come 2007/2008. I think you mean, "just imagine the sick, recession-eliminating gains that would have happened with every working adult legally required to put a portion of their paycheck into the stock or bond markets" PS: forget 2008, imagine GME if most people around the country had at least a few grand of retirement money to throw at the stock market and a very limited understanding of how investments work
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Feb 10, 2021 21:05
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I guess what I'm really asking is would it be better for the government to just issue everyone 401k accounts rather than just focus on increasing social security? Social security is a big part of the deficit whole 401k would be far cheaper for the budget. Or are 401ks at least better than pensions?
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Feb 10, 2021 21:09
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punk rebel ecks posted:I guess what I'm really asking is would it be better for the government to just issue everyone 401k accounts rather than just focus on increasing social security? Social security is a big part of the deficit whole 401k would be far cheaper for the budget. This is getting kind of outside the realm of personal investing - but, fundamentally, no. The way that social security works is that a chunk of current workers' pay goes to support current retirees. If there's a surplus (lots of young workers, not a lot of retirees), it gets saved in the social security trust fund and put into ultra-conservative investments that are supposed to match inflation - typically US government bonds. If there's a deficit, the money comes back out of the trust fund. Right now we're seeing the baby boomers retire, so there's a projected deficit for a while. Eventually that will flip, as boomers die off and their millennial children start paying more in. We may need to adjust the system, but as long as we don't pull a Japan and see some combo of low birth rates, low immigration, and low economic growth, the system is sound. If we just said "okay, we're turning off social security, your social security taxes are going to private investment accounts now" there would be a lot of old boomers who paid into the program and still depend on benefits. Deficits would increase massively, or we'd have to deal with a lot of starving homeless old people. It would also raise all the issues I spoke to in my earlier post. 401(k) and IRA investments are good for you, the individual, because more money saved for retirement is better than less money saved for retirement, and you can control how much goes into your 401(k). But that doesn't mean individual contributions are the best possible option - just the best option that's under your control right now and politically feasible to implement. punk rebel ecks posted:Or are 401ks at least better than pensions? This is a very complex question that comes back to technical details about the pension plan (and the 401(k), but there are fewer institutional variables there). Basically, if you think that whoever's offering you the pension is financially stable and going to stick around, the pension is a surer bet in retirement. Pensions are "defined benefit" plans, where you just get a certain amount of money every month and it's up to whoever owns the pension to figure out how to get it to you. On the other hand, if you don't trust their stability, or if you're in a place where you can afford to risk some of your retirement savings because you know you'll be able to eat and keep a roof over your head with other money, then directing your own investments in a 401(k) might be a better choice.
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Feb 10, 2021 21:23
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Red posted:Do you use their netbenefits.com site or something else? Yes, it's managed through netbenefits.
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Feb 10, 2021 21:23
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punk rebel ecks posted:I'm a dumb dumb who doesn't know the answer to this. If 401ks are so good, then why doesn't the government issue everyone 401ks instead of social security payments? They actually aren't good at all. They're just better than the other alternatives we have to work with. The USA in general has piss-poor retirement programs, and even Social Security doesn't actually cut it either. All it does is (sometimes) keep grandpa from being homeless, and that's not a given these days either given how quickly housing and health care expenses have outpaced earnings growth and the maximum benefit for SS. You do a 401(k) in addition to SS because (1) SS is insufficient on its own, (2) you never know when some cruel fuckers will decide to cut SS for your generation, and (3) it's better than a taxable account [doubly so if you have a company match]. In a non-hellworld, we'd have a proper pension system indexed to cost of living including health care expenses and housing costs. We don't have that, so instead we throw money into 401(k) investment accounts and pray.  quote:I guess what I'm really asking is would it be better for the government to just issue everyone 401k accounts rather than just focus on increasing social security? Social security is a big part of the deficit whole 401k would be far cheaper for the budget. It depends on the pension plan, and on whether the company has any intention of honoring it, or if they're just going to use a restructuring bankruptcy to kick it off to the pension insurance fund anyway and leave the gov't to figure out how much you actually get. Also, Social Security is only part of the deficit to make it sound unnecessarily expensive and create urgency to reduce it. SS expenditures are largely (if not entirely?) owed to ourselves, re: debt impact. Beyond that, federal issuance of 401(k) accounts would likely turn into the equivalent of the federal government using the entire US population to prop up the stock market. Nothing quite like a stock crash wiping out the savings of literally every person in America all at once to bring around regime change, though.
Sundae fucked around with this message at 22:02 on Feb 10, 2021 |
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Feb 10, 2021 21:57
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Sundae posted:In a non-hellworld, we'd have a proper pension system indexed to cost of living including health care expenses and housing costs. We don't have that, so instead we throw money into 401(k) investment accounts and pray. Are there any nations that do this?
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Feb 10, 2021 22:00
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And you get all the rich folks laughing about it because they cap out their social security contribution early in the year and get a little pay raise. If we uncapped it, like a sane country, we could trivially raise the minimum benefit. 401k is a symptom of a problem, one solution is to move all of the limits into a single easy to use account like an IRA. This would gut out 401k, 403b, 457a, solo-401k, simple ira, etc etc etc. You make it easy to direct deposit into them just like your paycheck, and off you go. Too D&D? Should we turn back now?
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Feb 10, 2021 22:01
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punk rebel ecks posted:I guess what I'm really asking is would it be better for the government to just issue everyone 401k accounts rather than just focus on increasing social security? Social security is a big part of the deficit whole 401k would be far cheaper for the budget. It might be useful if everybody knew how to manage their 401ks, but most people don’t so even if they have one, they might be badly managed/invested.
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Feb 10, 2021 22:06
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Despite my last post, I don't really make enough to max the 401k and I wish I did
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Feb 10, 2021 22:27
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H110Hawk posted:Too D&D? Should we turn back now? Eh, not really (at least IMO? Feel free to voice your thoughts, all). I think where we need to avoid D&Ding is when it gets in the way of financial discussion and actual good advice. At the risk of posting-about-posters: the difference (to me) between D&D finance-talk and BFC finance-talk is that BFC acknowledges the world they're stuck in and plays the hand they're dealt, whereas the D&D finance-talk tends to talk about all the flaws in the system and how it should get burned to the ground, and inevitably leads to people talking about how useless it is to save for retirement because (insert bullshit here). Keep the good advice and conversation going and a little D&D doesn't hurt things. Just don't let the derails take over or the toucans will return. quote:Are there any nations that do this? I haven't done a lot of searching, but a quick Google search shows Norway having a mandatory public pension with no income cap on deductions, providing approx 60% wage replacement in old age. On top of that, private occupational pensions are mandatory benefit offerings for many/most companies in the country, which are required to be fully-funded. There is also something about insurance-funded pensions making up most private pensions, but it's not something I've done much reading on. https://www.pensionfundsonline.co.u...20the%20system. Sundae fucked around with this message at 22:33 on Feb 10, 2021 |
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Feb 10, 2021 22:27
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Space Gopher posted:If there's a surplus (lots of young workers, not a lot of retirees), it gets saved in the social security trust fund and put into ultra-conservative investments that are supposed to match inflation - typically US government bonds. If there's a deficit, the money comes back out of the trust fund. Right now we're seeing the baby boomers retire, so there's a projected deficit for a while. Eventually that will flip, as boomers die off and their millennial children start paying more in. We may need to adjust the system, but as long as we don't pull a Japan and see some combo of low birth rates, low immigration, and low economic growth, the system is sound. This is a pretty rosy picture of SS. A more sober look would point out: 1. The trust fund is an accounting fiction. It holds no real assets, the money has already been spent 2. The current benefit payout formula makes it mathematically impossible to grow your way out of trouble - benefit payouts just ramp up faster in good economic times 3. Birth rates are already low in the US (too low for SS sustainability, anyway), and are likely to continue to decline slowly, just like all the rest of the developed world The system is not sound, and it's going to need reform that is politically impossible at the moment.
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Feb 10, 2021 22:32
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Arguably lifting the cap on SS taxes while keeping the cap on benefits would go a long way toward fixing SS. It's nuts that a person stops paying into SS at like 140k/yr. But that's politically impossible because it helps poor people at the expense of rich people. Even if we could do it, it'd put an even bigger target on the back of SS which the right have been salivating over privatizing for decades. One of the reasons that SS is such the sacred cow that it is is that it as seen as "fair" and "earned" because what you get out in retirement is (some derivative of) what you put in during your working years. The retirement planning landscape in America is disjointed, inequitable, and full of misleading or outright huckster institutions vying for your money. It's an awful, awful system but like was said this thread is about playing the hand we are dealt to the best of our ability. Giving up just because the system is flawed is precisely the wrong thing to do. But  And if it all comes crashing down in a fiery collapse nothing will matter anymore anyway. Guinness fucked around with this message at 22:56 on Feb 10, 2021 |
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Feb 10, 2021 22:51
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ROJO posted:Oh yeah, I know the megabackdoor thing is real, I'm just........surprised there is an option for automatic, daily conversions of all after-tax contributions (and no limit on number of conversions). That part is what sounds too good to be true. Vanguard has it too, it's awesome.
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Feb 10, 2021 22:58
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Sundae posted:I haven't done a lot of searching, but a quick Google search shows Norway having a mandatory public pension with no income cap on deductions, providing approx 60% wage replacement in old age. On top of that, private occupational pensions are mandatory benefit offerings for many/most companies in the country, which are required to be fully-funded. There is also something about insurance-funded pensions making up most private pensions, but it's not something I've done much reading on. Good stuff. I'm trying to find data on how much each nation spends on their "social security" per capita. SlapActionJackson posted:This is a pretty rosy picture of SS. A more sober look would point out: The sad thing is that America is probably in better shape than most developed nations due to immigration and higher birth rates masking the decline. As oppose to say Japan or Germany.
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Feb 10, 2021 23:19
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Guinness posted:Arguably lifting the cap on SS taxes while keeping the cap on benefits would go a long way toward fixing SS. It's nuts that a person stops paying into SS at like 140k/yr. You wouldn't even have to cap the benefits. As is, Social Security has diminishing returns as you contribute more and more (the 'bend points'). You just need to add a few more bend points and benefit layers on top to dress it up a little.
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Feb 10, 2021 23:20
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ROJO posted:Can someone clear something up for me regarding 401k in-plan conversions to Roth? My 401k is through fidelity, and I have already been maxing out a $19.5k Roth contribution, and get a 10% company match, and am fully-vested in everything. It turns out that our plan recently enabled you to choose automatic, daily, in-plan conversions to Roth for after-tax contributions if I want. I started doing this (also with Fidelity) a couple of paychecks ago and haven't had any problems. Their phone support is pretty good at walking you through it. H110Hawk posted:You also must front-load your regular salary deferral ($19,500) before you gain access to the rest of it. Next payday I will hit the Traditional 401k limit and start in on after tax at a much less breakneck pace spread evenly through most of the year. I don't have to front-load, so this might be plan-specific. In fact, the Fidelity rep I talked to specifically recommended against it, because some companies refuse to front-load their match even if you front-load your contributions, so you can miss out on matching dollars if you do it.
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Feb 11, 2021 01:32
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I am requesting some help to make sure I’m not missing anything in my overall long term investing goals, and subsequent retirement. I am 35, with a 20-year runway to retirement. 55 is the goal, and not something I’d be flexible on, if only to be younger on retirement. I am on a pension system, with approximately a 37% annual payout. It follows a 2% @ 62 payout scheme from each year 52 to 62 (1.0, 1.1…2%). At 55 I will have around 28 years of service (excess sick is converted to service), however with some unknown amount of end career salary. I currently only contribute to ROTH, though I have an option of a 403(b) but no match. I’ve opted out of that so far because I’ve just now been able to safely max my ROTH, fund 6 month emergency fund, and can start working on a taxable brokerage account. It is very unlikely I can afford a house in the next 5-10 years, but ultimately a goal is a place to call my own (including the additional expense). I will need some amount of money to weather 5 years between retirement and the ability to take withdrawals from the retirement account. HSA is not a concern as my healthcare is well provided for at no cost to myself, and will continue in retirement. I see my goals are to try to figure out how much should I fund the HYSA, 403(b), and taxable account afterwards. Am I missing anything I should be on the lookout for? I have a spouse, no dependents or need to save for dependents, no debt, no house. The only thing I care about leaving behind is enough support for spouse in the event of my first passing. Thanks for the help. I was going to also show the math part of it, but that's really wordy, and too speculative.
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Feb 11, 2021 01:54
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punk rebel ecks posted:
Hey.Consumers buddy! I’ve been wanting to get their credit card, but my credit score sucks at 583. I’ve been afraid to apply for their card and get denied, thus hurting my score even more. I’m stuck with a crappy secured Discover card right now. (I never carry a balance though)
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Feb 11, 2021 02:02
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raminasi posted:I started doing this (also with Fidelity) a couple of paychecks ago and haven't had any problems. Their phone support is pretty good at walking you through it. Excellent. Glad to know Yet Another Thing that's different between plans. I have to front load to use mine, but we do true up our contributions albeit in like June of the following year for unknown reasons. I guess I could do the math better so it lands right on my last paycheck of the year to hit the $57k target plus ESPP but that sounds like work. It would make my match be mine longer.
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Feb 11, 2021 02:07
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Valicious posted:Hey.Consumers buddy! I’ve been wanting to get their credit card, but my credit score sucks at 583. I’ve been afraid to apply for their card and get denied, thus hurting my score even more. I’m stuck with a crappy secured Discover card right now. (I never carry a balance though) I forgot to add that the interest rate is only up to $10,000. So if you have more it won't matter. But it's a checking account and not a savings account so...yeah you shouldn't have more than $10,000 in there anyway. In terms of their credit card I recall hearing they could be strict but not sure how strict. I didn't have a problem but then again I have a good score.
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Feb 11, 2021 02:32
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Hey folks - completely new to investing here and realizing that I'm starting to save for retirement way too late (by like a decade). I'm hoping to turn that around and would really appreciate any advice. I'm currently 35 and have started contributing 10% to my 401k. I'm also moving about 4k in savings into a Roth IRA which will max me out for tax years 2020 and 2021, and 2k more into a regular IRA as soon as I have more saved. My question right now is specifically what funds to look at for the Roth account. From reading this thread, it seems that my best bet might be a Vanguard Target Retirement fund since I'll be under the 3k limit (for the time being) to divvy up between a few of the admiral funds. Vanguard suggests the 2055 fund for me but is this assuming someone who started saving at the correct time or does it not make a difference? Should I look at a 2060 fund instead? Or does this not matter much in the short term if I plan to move from a Target Retirement fund into an assortment of Admiral funds when finances eventually permit? Any advice would be super welcome and thanks already for all the wise postin' in this thread that has gotten me up to the point of even understanding what a retirement fund is.
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Feb 11, 2021 03:29
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Everyones Favorite Poster posted:I'm also moving about 4k in savings into a Roth IRA which will max me out for tax years 2020 and 2021, and 2k more into a regular IRA as soon as I have more saved. I'm confused about this. 2020 & 2021 IRA contrib limits are $6,000 for each year. So $12,000 total. Have you already put $8k in your Roth IRA that $4k more would max you out? If you max out the Roth IRA you can't also contribute to a "regular" (traditional) IRA. It's a joint contribution limit for both. 2055 Target Retirement fund is an appropriate choice for yo. It doesn't really make a difference that you're late getting started. What matters is how much time you have left before retirement.
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Feb 11, 2021 03:46
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SlapActionJackson posted:I'm confused about this. 2020 & 2021 IRA contrib limits are $6,000 for each year. So $12,000 total. Have you already put $8k in your Roth IRA that $4k more would max you out? Sorry for the confusion and thanks for the advice. I'm currently earning 135k so my Roth contributions are limited. I've made an $1,800 contribution to the Roth for tax year 2021 (I believe the maximum for me is $2,000), and plan on making an additional $2,200 contribution for tax year 2020 (I was earning less last year). I also plan on separately contributing 2-3k into a regular IRA for tax year 2020 depending how much I can save by April. Does that make sense or am I missing something obvious? Thanks again!
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Feb 11, 2021 03:57
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First off, good job getting started. The first step is the hardest, the first 100k is the hardest, etc. It's probably not obvious, but you should fully contribute to a trad IRA and then push the magic button that says "convert to Roth" rather than trying to do these elaborate splits. You also should use older space before newer but it sounds like the ship has sailed on some of that. Simplistic answer for target date: it's based on when you want to retire, so - do you think you want to retire closer to 2055 or 2060? More complex answer for target date: The 2060 fund will have a higher proportion of equities on any given year between now and 2055, so if you have more of an appetite for risk then picking the 2060 (or 2065, or 2070 if it exists) fund is better.
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Feb 11, 2021 04:06
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KYOON GRIFFEY JR posted:First off, good job getting started. The first step is the hardest, the first 100k is the hardest, etc. Thanks so much for the advice! Can you elaborate on the advantages of rolling over from a traditional IRA into my Roth rather than doing a direct contribution to the Roth (or point me to a place where I can read up on this)? Is it mostly for the sake of simplicity for tracking my overall IRA contribution? Sorry for my ignorance on this. I'm also now noticing that the broker that holds my Roth (Schwab) is also asking for a $3k minimum investment for the Vanguard 2055 Retirement Fund although the Vanguard website claims the min. is 1k. I'm guessing this is a downside for not going directly through Vanguard? Is it worth closing my Schwab account and opening a new one at Vanguard to get around this (I'm guessing the headache of moving the balance over wouldn't be), or is there another similarly-performing/low expense ratio fund with a smaller minimum investment that I can get started with for now, and move it over to a Vanguard fund once my balance grows i.e the Schwab target 2055 index fund? Also, am I understanding the last part correctly i.e. would I be able to move from a "starter" fund into a Vanguard fund without penalties/losing out on compounding interest eventually? Thanks again!! Everyones Favorite Poster fucked around with this message at 04:27 on Feb 11, 2021 |
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Feb 11, 2021 04:14
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