giramomma
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Post by giramomma on Jan 15, 2020 14:19:15 GMT -5
I was puzzled by this- are you saying that you figure that the Full Retirement Age will be raised again and again and that even past age 70 you won't be able to get your full benefit because of that? Or are you affected by the Windfall elimination Provision? I am 44. For the last decade, give or take, SS has already been telling me to expect 70% of my full benefit. Oh, they don't print it in capital letters...just a tiny little asterisk that goes to the bottom of the page..where you have to read the fine print. Bottom line, since my 30's SS has been telling me not to expect my full benefit.
Barring the early, mass extinction of boomers coupled with the birth rate drastically increasing..I think in 23 year years, there will not be enough money to fully fund retirement safety nets the gov't provides.
If you do a quick search on Medicare and SS insolvency, Medicare is insolvent within the next decade. SS, two decades. That's before I qualify for the programs I pay into.
Something will have to happen. We can't fully fund social security, medicare, and take care of our other obligations. I mean, at some point, I assume our country cannot pay our financial obligations by creating more debt. I say assume, because I've never tried that, but I also know it's bad for my personal finances.
So. We have some solutions. Extending the retirement age is one. Raising taxes is another. Reducing benefits is another. Means testing the programs so that they are really only for the folks that are truly poor ...I'm thinking something like benefits where you are only allowed 2K of assets or something... None of these are popular. And the way politicians can't get along now...Medicare and SS will probably be past crisis mode when they do finally get fixed. And it's going to be ugly. I really don't think we're at a point where cooler heads are going to prevail, and suddenly we're getting politicians that advocate for the common good. Maybe, if there's real civil unrest...but now..it's not happening.
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jerseygirl
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Post by jerseygirl on Jan 15, 2020 14:25:50 GMT -5
Listen to what Warren and Sanders are saying- ‘free’ Medicare for all (maybe even everyone who can get over the border) If anyone thinks the money is only coming from billionaires They also have a bridge in Brooklyn to selll you The money will come from the middle class with much higher taxes
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giramomma
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Post by giramomma on Jan 15, 2020 14:36:23 GMT -5
I already know several people/families where this is happening, for one reason or another. My mom is retiring next month (she’s 68), and will likely move in with us within a year. She can afford to stay on her own if she stays in my small hometown/her paid for house, but my sister and I both live in the same metro area about 2.5 hours away, and she wants to be near her kids and grandkids. The reality is she can’t afford anything near us, and frankly, I could use an extra driver to help coordinate kid activities or even make sure dinner happens in a timely manner, so the plan is for her to move in with us. We bought our house knowing we’d likely have a parent move in, so there is a guest bedroom and a full bath on our main level that will become hers. One of my coworkers lived with her mom when she got divorced and was a single mom to a toddler. Then when she earned more and decided to buy a house in a better school district, her mom decided to move with her to help with the grandkid and because she was close to her daughter/grandkid. When my coworker switched jobs and moved 2 states away, mom moved in with another daughter in our area. This mom can afford to live on her own, but likes being around her family and helping out. From everyone I’ve heard, it’s working really well for this family. My SIL’s (wife of DH’s bro) mom lived with her and BIL and their kids. Mom had a late in life divorce that left her in bad shape financially, and she has MS on top of that, so it’s easier for SIL to help care for her mom when she’s in the same household. I have a coworker who lived with one of her sons, DIL and grandkids to help out with with the kids, and again, because she likes being around people and not living by herself. Definitely not the norm yet, but I do seem to hear about multigenerational living more often. My inlaws are close to us.. At 74, now, they are definitely slowing down and getting more health issues. Even things like colds are taking longer to get over. They aren't spry 50-something year olds.
We've already started cutting down how much we ask my inlaws to help out. And we're trying super hard to keep DH working part time so that he can absorb helping out his parents more. It's coming, just a matter of when... I guess my point was I don't think folks think of the costs of caring for aging parents. One of my coworkers was the caretaker of her parents. They live independently, but close by. Still need help. When she worked with me, she was only at 80%, and she wished she could cut down even further, because she was stretched too thin with a teen and a tween.
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giramomma
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Post by giramomma on Jan 15, 2020 14:38:41 GMT -5
Listen to what Warren and Sanders are saying- ‘free’ Medicare for all (maybe even everyone who can get over the border) If anyone thinks the money is only coming from billionaires They also have a bridge in Brooklyn to selll you The money will come from the middle class with much higher taxesWell, I think the middle class needs to start paying taxes. Last year, we grossed 85K, and paid 0 in taxes. Got more back than we paid in because the CTC is refundable now. I haven't played around...but I'm betting we could get close to grossing 100K and still not pay anything in taxes. We don't live in a VHOCLA, so that's not poverty income.
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thyme4change
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Post by thyme4change on Jan 15, 2020 15:07:38 GMT -5
I think employers should be required to give higher matching and maybe contributions with or without matching for low income people - all employers, even those without a plan would have to contribute to an IRA. And none of those contributions can be touched for any reason before 59.5 (or whatever the age is). If we don't trust people, make it so they can only withdraw 10% of the balance for the first 10 years.
Imagine how much better off people would be, even if they got just a small percent of their salary added to their net worth, starting at age 16. Even if they worked part time at a minimum wage job, they would have a cushion when they age.
Take some of the financial burden off the government and put it back on business, where it belongs.
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Deleted
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Post by Deleted on Jan 15, 2020 15:39:08 GMT -5
I am 44. For the last decade, give or take, SS has already been telling me to expect 70% of my full benefit. Oh, they don't print it in capital letters...just a tiny little asterisk that goes to the bottom of the page..where you have to read the fine print. Bottom line, since my 30's SS has been telling me not to expect my full benefit. OK- Thanks for the clarification. Yes, I've seen the same figure. I guess I'm numb to it because I already get 70% of my promised benefit. They give it with one hand and claw back 30% of it with the other on April 15.
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haapai
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Post by haapai on Jan 15, 2020 16:24:18 GMT -5
There's something about this thread that is bringing out the bomb-throwing anarchist in me.
Maybe it's because the article was paywalled and that I can only imagine what it said. Perhaps the article was tightly focused on a specific set of issues that most of us simply can't focus on because we couldn't read the article. But I suspect that something else is going on. Quite frankly, reading this thread makes me feel exactly what I felt when I read about the SECURE act passing. What's being proposed is just lovely for those with the ability to save, particularly those who can save a lot, but offers almost nothing for those who can't and don't save.
Maybe focusing on 401(k) reform is putting the cart before the horse. Maybe what low-wage and spendthrift workers need more is help getting themselves into a position where they can invest in retirement funds. A lot of my coworkers don't have bank accounts or the minimum balances needed to avoid low balance fees, or $500 in savings, or real EFs. Maybe if my employer offered them a way to accumulate these amounts via small percentage-based payroll deductions, they'd someday be in a position to actually make long-term investments.
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Tiny
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Post by Tiny on Jan 15, 2020 16:27:35 GMT -5
""Pensions are a tricky thing depending on how well they are funded.
FWIW: without a pension benefit - I really would have to save the 2.5million""
The fact that the employee is the one who funds the pension is often missed. Ie, if someone has a pension that is worth $2.5m it is because that money was deducted from their pay and invested for them.
I wasn't clear. I'm using the "rule of thumb" where you withdraw 4% from retirement accounts (I know it's a rule of thumb and may not be accurate - it just gives a good example): To have 100K of income in retirement I'd have to do one of the following: Have 2.5 million in retirement savings (be it differed or taxable) Plus whatever I'd get from SS With a pension benefit of say 40K per year - I'd need 1.5 million in retirement savings to make up the other 60K, plus whatever I'd get from SS Of course, I could just plan to make due with the 40K per year pension and SS in retirement and not need any retirement savings what so ever. That said, I DO agree that a defined benefit (pension) is part of an employees compensation package. Employees may even fund some of the pension (or perhaps instead of contributing to SS their and their employers portion go to the pension. They cannot collect SS when they reach retirement age - that's how the local teachers pension works). The employee may get more money OUT of the pension then they contributed. When my 401K money runs out - I don't have any income.
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hoops902
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Post by hoops902 on Jan 15, 2020 16:34:33 GMT -5
""Pensions are a tricky thing depending on how well they are funded.
FWIW: without a pension benefit - I really would have to save the 2.5million""
The fact that the employee is the one who funds the pension is often missed. Ie, if someone has a pension that is worth $2.5m it is because that money was deducted from their pay and invested for them.
I wasn't clear. I'm using the "rule of thumb" where you withdraw 4% from retirement accounts (I know it's a rule of thumb and may not be accurate - it just gives a good example): To have 100K of income in retirement I'd have to do one of the following: Have 2.5 million in retirement savings (be it differed or taxable) Plus whatever I'd get from SS With a pension benefit of say 40K per year - I'd need 1.5 million in retirement savings to make up the other 60K, plus whatever I'd get from SS Of course, I could just plan to make due with the 40K per year pension and SS in retirement and not need any retirement savings what so ever. That said, I DO agree that a defined benefit (pension) is part of an employees compensation package. Employees may even fund some of the pension (or perhaps instead of contributing to SS their and their employers portion go to the pension. They cannot collect SS when they reach retirement age - that's how the local teachers pension works). The employee may get more money OUT of the pension then they contributed.
When my 401K money runs out - I don't have any income. Yes, though if you turned your 401k in an annuity payment, you'd be in the same boat as the pension. Same as what happens with Social Security. If you outlive your expectation, you get more out than you really put in. If you don't, then you lose out. You could pull your 401k money out when you hit your retirement age, buy an immediate annuity, and be in the same boat. The 401k simply offers that extra option of non-annuitization if you want it.
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Tiny
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Post by Tiny on Jan 15, 2020 16:46:31 GMT -5
Listen to what Warren and Sanders are saying- ‘free’ Medicare for all (maybe even everyone who can get over the border) If anyone thinks the money is only coming from billionaires They also have a bridge in Brooklyn to selll you The money will come from the middle class with much higher taxesWell, I think the middle class needs to start paying taxes. Last year, we grossed 85K, and paid 0 in taxes. Got more back than we paid in because the CTC is refundable now. I haven't played around...but I'm betting we could get close to grossing 100K and still not pay anything in taxes. We don't live in a VHOCLA, so that's not poverty income.
No, the unmarried, no children Middle Class is taxed enough, thankyou very much. There's no way I can get my Federal taxes to 0 on an 85K salary without a hubby or kids (not even with a money pit rental property...) . I would be paying approx 15k in federal tax. I could lower that my contributing to pretax retirement - but I'm still paying taxes just less. I think Middle Class Marrieds and those with kids need to start paying their fair share. Don't make me pay even more so you can pay a couple thousand a year while still getting all your deductions/credits/exemptions for being married with kids.
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Tiny
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Post by Tiny on Jan 15, 2020 16:50:27 GMT -5
I was puzzled by this- are you saying that you figure that the Full Retirement Age will be raised again and again and that even past age 70 you won't be able to get your full benefit because of that? Or are you affected by the Windfall elimination Provision? I am 44. For the last decade, give or take, SS has already been telling me to expect 70% of my full benefit. Oh, they don't print it in capital letters...just a tiny little asterisk that goes to the bottom of the page..where you have to read the fine print. Bottom line, since my 30's SS has been telling me not to expect my full benefit.
Barring the early, mass extinction of boomers coupled with the birth rate drastically increasing..I think in 23 year years, there will not be enough money to fully fund retirement safety nets the gov't provides.
If you do a quick search on Medicare and SS insolvency, Medicare is insolvent within the next decade. SS, two decades. That's before I qualify for the programs I pay into.
Something will have to happen. We can't fully fund social security, medicare, and take care of our other obligations. I mean, at some point, I assume our country cannot pay our financial obligations by creating more debt. I say assume, because I've never tried that, but I also know it's bad for my personal finances.
So. We have some solutions. Extending the retirement age is one. Raising taxes is another. Reducing benefits is another. Means testing the programs so that they are really only for the folks that are truly poor ...I'm thinking something like benefits where you are only allowed 2K of assets or something... None of these are popular. And the way politicians can't get along now...Medicare and SS will probably be past crisis mode when they do finally get fixed. And it's going to be ugly. I really don't think we're at a point where cooler heads are going to prevail, and suddenly we're getting politicians that advocate for the common good. Maybe, if there's real civil unrest...but now..it's not happening. Would anyone really notice if the 6.2% SS payroll tax was raised? That's the tax that would be raised. I know raising taxes is unpopular - but really, if no one notices is it really that bad?
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Tiny
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Post by Tiny on Jan 15, 2020 17:00:45 GMT -5
There's something about this thread that is bringing out the bomb-throwing anarchist in me.
Maybe it's because the article was paywalled and that I can only imagine what it said. Perhaps the article was tightly focused on a specific set of issues that most of us simply can't focus on because we couldn't read the article. But I suspect that something else is going on. Quite frankly, reading this thread makes me feel exactly what I felt when I read about the SECURE act passing. What's being proposed is just lovely for those with the ability to save, particularly those who can save a lot, but offers almost nothing for those who can't and don't save.
Maybe focusing on 401(k) reform is putting the cart before the horse. Maybe what low-wage and spendthrift workers need more is help getting themselves into a position where they can invest in retirement funds. A lot of my coworkers don't have bank accounts or the minimum balances needed to avoid low balance fees, or $500 in savings, or real EFs. Maybe if my employer offered them a way to accumulate these amounts via small percentage-based payroll deductions, they'd someday be in a position to actually make long-term investments.
I totally agree with you on that. For the last 3-4 years I've been listening to a bunch of relatives belly ache about RMDs and how much in taxes they will have to pay and how this "came out of the blue" and what not... I'm not anywhere near retirement - much less 70yo - and I kept suggesting they start doing Roth conversions or just do withdrawals and give the money to their kids (15K per kid per year is tax free to the kid-- yeah, they the parent would take a tax hit on the withdrawal... but it would benefit the kid at a time in their life when exta $$ might be helpful (getting married, house buying, procreating,etc). My relatives all have pensions in addition to 401K/IRAs other numbered accounts that got very fat during the 10 year bull market. They don't need the money in their tax advantaged accounts for day to day expenses. So, yeah, the SECURE act gives them two more years to move money around. They haven't stopped bellyacheing yet... ::eye roll:: (oh and if I hear how the taxes being paid on the TAX DIFFERED money is the government taking their "hard earned money" one more time - someone may get hit in the head with a two by four. ) Wealthy Old People.
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NastyWoman
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Post by NastyWoman on Jan 15, 2020 19:22:54 GMT -5
I totally agree with you on that. For the last 3-4 years I've been listening to a bunch of relatives belly ache about RMDs and how much in taxes they will have to pay and how this "came out of the blue" and what not... I'm not anywhere near retirement - much less 70yo - and I kept suggesting they start doing Roth conversions or just do withdrawals and give the money to their kids (15K per kid per year is tax free to the kid-- yeah, they the parent would take a tax hit on the withdrawal... but it would benefit the kid at a time in their life when exta $$ might be helpful (getting married, house buying, procreating,etc). My relatives all have pensions in addition to 401K/IRAs other numbered accounts that got very fat during the 10 year bull market. They don't need the money in their tax advantaged accounts for day to day expenses. So, yeah, the SECURE act gives them two more years to move money around. They haven't stopped bellyacheing yet... ::eye roll:: ( oh and if I hear how the taxes being paid on the TAX DIFFERED money is the government taking their "hard earned money" one more time - someone may get hit in the head with a two by four. ) Wealthy Old People. I am normally not that slow on the uptake but I did have to read this several times before I realized what you they were saying.
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teen persuasion
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Post by teen persuasion on Jan 15, 2020 23:14:52 GMT -5
I’ve said it before but I would get rid of 401k’s and allow everyone the same contribution limits in an IRA. People could then bring their IRA routing information to their employer for direct deposit just like they do their checking accounts for their paycheck. I don’t think the big finance lobby would allow it because now they can bid by employer to win huge batches of customers, in my idea they would have to win over each individual customer. It's beyond unfair asymmetrical that some employees have the ability to tax defer multiples ($19.5k or $26k) of the IRA limit IN ADDITION TO funding an IRA, while others only have the $6k or $7k IRA limit. Give everyone the same, combined, total limit. It's also asymmetrical that employer plan deferrals lower both w2 wages and AGI (imperative for EITC calculations), while IRA contributions only affect AGI (so fails the EITC calculations on both). The best part of the IRA rules is the ability to open one at any brokerage, and thus choose your provider and investments and fees! If the industry can manage that, they can manage a truly portable IRA/401k hybrid with a single combined limit and that allows employee contributions thru payroll and employer matching contributions. Streamline the whole retirement account definition and rules - no dozen slightly different types with minor quirky rules (401ks and 403bs share a combined contribution limit, but a 457 has a separate limit so you can double up, while a SIMPLE IRA has a different lower limit, etc.). Mandate a minimum match, or even a flat match (for fairness - why should some employees get nothing, others get a pittance, others five figures?) and get rid of vesting schedules. Iron out all the quirky loopholes around Roth contributions - get rid of the Roth income limit, it's stupid in the face of the backdoor Roth IRA option. Ditto for the mega backdoor Roth 401k backflips - if they (larger Roth space beyond the $19.5k/$26k contribution limit) should be an option, just increase the Roth retirement space after pre-tax space and be done with it.
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bobosensei
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Post by bobosensei on Jan 16, 2020 7:51:32 GMT -5
Poverty in old age is sad. But I think people will still end up there if they have the inclination to spend. You can force the savings, but they will still withdraw too quickly to spend so that the money doesn't sustain them through the entire retirement period if they want to.
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thyme4change
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Post by thyme4change on Jan 16, 2020 8:40:11 GMT -5
There's something about this thread that is bringing out the bomb-throwing anarchist in me.
Maybe it's because the article was paywalled and that I can only imagine what it said. Perhaps the article was tightly focused on a specific set of issues that most of us simply can't focus on because we couldn't read the article. But I suspect that something else is going on. Quite frankly, reading this thread makes me feel exactly what I felt when I read about the SECURE act passing. What's being proposed is just lovely for those with the ability to save, particularly those who can save a lot, but offers almost nothing for those who can't and don't save.
Maybe focusing on 401(k) reform is putting the cart before the horse. Maybe what low-wage and spendthrift workers need more is help getting themselves into a position where they can invest in retirement funds. A lot of my coworkers don't have bank accounts or the minimum balances needed to avoid low balance fees, or $500 in savings, or real EFs. Maybe if my employer offered them a way to accumulate these amounts via small percentage-based payroll deductions, they'd someday be in a position to actually make long-term investments.
I totally agree with you on that. For the last 3-4 years I've been listening to a bunch of relatives belly ache about RMDs and how much in taxes they will have to pay and how this "came out of the blue" and what not... I'm not anywhere near retirement - much less 70yo - and I kept suggesting they start doing Roth conversions or just do withdrawals and give the money to their kids (15K per kid per year is tax free to the kid-- yeah, they the parent would take a tax hit on the withdrawal... but it would benefit the kid at a time in their life when exta $$ might be helpful (getting married, house buying, procreating,etc). My relatives all have pensions in addition to 401K/IRAs other numbered accounts that got very fat during the 10 year bull market. They don't need the money in their tax advantaged accounts for day to day expenses. So, yeah, the SECURE act gives them two more years to move money around. They haven't stopped bellyacheing yet... ::eye roll:: (oh and if I hear how the taxes being paid on the TAX DIFFERED money is the government taking their "hard earned money" one more time - someone may get hit in the head with a two by four. ) Wealthy Old People. Lol. We had dinner with my parents and they were complaining that they had "so much money" that they didn't know what to do with it. They also complained about taxes because they forgot to do something one year and it ended up costing them big time. I could hear the tiny, whiney violins playing them a sad song. 😂
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Deleted
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Post by Deleted on Jan 16, 2020 8:44:09 GMT -5
Poverty in old age is sad. But I think people will still end up there if they have the inclination to spend. You can force the savings, but they will still withdraw too quickly to spend so that the money doesn't sustain them through the entire retirement period if they want to. I know. A deacon in our church had told me that she and her husband had spent most of their retirement savings on their dream trip to Greece (both were of Greek descent) but they were doing OK on SS. That tells me, of course, that they didn't have much saved in the first place- they're not they types who would have flown there in Business Class and chartered a yacht. And then he died, 3 weeks after being diagnosed with an aggressive form of cancer. Her household income went from 150% of his SS amount to 100%. She sold the house and moved into a tiny condo in a retirement home. I hope the money from the house sale lasts. And then there are the sad stories of people whose retirement savings dried up during the last recession- when you dig into the details, they HAD to withdraw at least $X every year to meet basic expenses (and maybe some wants) and couldn't cut that back in bad years, so they sold at bargain-basement prices. I try not to get uppity about this. I know I was blessed with marketable skills and good health and I once estimated that about half of what I have is from 3 primary home sales (mine and the Ex's, mine when I relocated, DH's after we married) where I/we sold into a very good market. Pure luck. I like to think there was still some sensible decisions and good planning, too.
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gs11rmb
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Post by gs11rmb on Jan 16, 2020 8:46:39 GMT -5
It's beyond unfair asymmetrical that some employees have the ability to tax defer multiples ($19.5k or $26k) of the IRA limit IN ADDITION TO funding an IRA, while others only have the $6k or $7k IRA limit. Give everyone the same, combined, total limit. It's also asymmetrical that employer plan deferrals lower both w2 wages and AGI (imperative for EITC calculations), while IRA contributions only affect AGI (so fails the EITC calculations on both). The best part of the IRA rules is the ability to open one at any brokerage, and thus choose your provider and investments and fees! If the industry can manage that, they can manage a truly portable IRA/401k hybrid with a single combined limit and that allows employee contributions thru payroll and employer matching contributions. Streamline the whole retirement account definition and rules - no dozen slightly different types with minor quirky rules (401ks and 403bs share a combined contribution limit, but a 457 has a separate limit so you can double up, while a SIMPLE IRA has a different lower limit, etc.). Mandate a minimum match, or even a flat match (for fairness - why should some employees get nothing, others get a pittance, others five figures?) and get rid of vesting schedules. Iron out all the quirky loopholes around Roth contributions - get rid of the Roth income limit, it's stupid in the face of the backdoor Roth IRA option. Ditto for the mega backdoor Roth 401k backflips - if they (larger Roth space beyond the $19.5k/$26k contribution limit) should be an option, just increase the Roth retirement space after pre-tax space and be done with it. I was shocked when I discovered that a couple of years ago. I have both options at work so could, theoretically, stash away $38,000 per year in tax deferred accounts. In addition, I get a 50% match on the first 6% in both plans. It's great for me but seems somehow unfair that someone with a different employer making an identical salary could be restricted to only $6,000 per year.
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azucena
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Post by azucena on Jan 16, 2020 8:56:25 GMT -5
Yeah, it's the unevenness of maximums that gets me. When I crossed into executive territory, I got stock options. AND, I have access to some kind of account where I can stash more than the $19k 401k limit in order to make sure that I get the full 5% company match on my salary. I can't say that I follow it all and don't really need to because it's not until the $380k+ salary mark where that becomes an issue (19,000/.05). I'm 'only' creeping up to $200k and no plans to move further. Just seems weird to me that people with high incomes that already make it easier to save get even more money 'thrown' at them.
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teen persuasion
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Post by teen persuasion on Jan 16, 2020 9:17:25 GMT -5
It's beyond unfair asymmetrical that some employees have the ability to tax defer multiples ($19.5k or $26k) of the IRA limit IN ADDITION TO funding an IRA, while others only have the $6k or $7k IRA limit. Give everyone the same, combined, total limit. It's also asymmetrical that employer plan deferrals lower both w2 wages and AGI (imperative for EITC calculations), while IRA contributions only affect AGI (so fails the EITC calculations on both). The best part of the IRA rules is the ability to open one at any brokerage, and thus choose your provider and investments and fees! If the industry can manage that, they can manage a truly portable IRA/401k hybrid with a single combined limit and that allows employee contributions thru payroll and employer matching contributions. Streamline the whole retirement account definition and rules - no dozen slightly different types with minor quirky rules (401ks and 403bs share a combined contribution limit, but a 457 has a separate limit so you can double up, while a SIMPLE IRA has a different lower limit, etc.). Mandate a minimum match, or even a flat match (for fairness - why should some employees get nothing, others get a pittance, others five figures?) and get rid of vesting schedules. Iron out all the quirky loopholes around Roth contributions - get rid of the Roth income limit, it's stupid in the face of the backdoor Roth IRA option. Ditto for the mega backdoor Roth 401k backflips - if they (larger Roth space beyond the $19.5k/$26k contribution limit) should be an option, just increase the Roth retirement space after pre-tax space and be done with it. I was shocked when I discovered that a couple of years ago. I have both options at work so could, theoretically, stash away $38,000 per year in tax deferred accounts. In addition, I get a 50% match on the first 6% in both plans. It's great for me but seems somehow unfair that someone with a different employer making an identical salary could be restricted to only $6,000 per year. Retirement savings in my name is only 20% of our total retirement savings (all Roth IRA until this past July), most is in DH's name (mostly traditional because of higher 401k limits) because he has access to a 401k and I do not. I *just* got my employer to start a SIMPLE IRA last July, so we shifted our contributions to fully fill that, and put the remainder in DH's work account, but that just means we are saving roughly similar amounts this year (SIMPLE IRA limit is $13k + $3.5k catchup), I'm not exceeding his portion, to try to get ahead. As long as we view all savings as joint, the imbalance doesn't matter to us, but whose name is on the account DOES matter for state taxation. My state exempts the first $20k of annual retirement account withdrawals/conversions per person. If we have balances in both our names, we have twice the tax free space, vs in only DH's name. At this point in time, I'm not going to build up much in traditional contributions/balances before I retire, unless I work more years. The longer I work, the longer we put off Roth conversions of DH's balances (because no space to do them), making the balances grow, so there's more to convert or to pay tax on... IOW, we will be further penalized in retirement for my employer's lack of a retirement account, by paying more tax on similar withdrawals (vs a couple who both have employer retirement accounts).
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Tiny
Senior Associate
Joined: Dec 29, 2010 21:22:34 GMT -5
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Post by Tiny on Jan 16, 2020 10:58:53 GMT -5
I totally agree with you on that. For the last 3-4 years I've been listening to a bunch of relatives belly ache about RMDs and how much in taxes they will have to pay and how this "came out of the blue" and what not... I'm not anywhere near retirement - much less 70yo - and I kept suggesting they start doing Roth conversions or just do withdrawals and give the money to their kids (15K per kid per year is tax free to the kid-- yeah, they the parent would take a tax hit on the withdrawal... but it would benefit the kid at a time in their life when exta $$ might be helpful (getting married, house buying, procreating,etc). My relatives all have pensions in addition to 401K/IRAs other numbered accounts that got very fat during the 10 year bull market. They don't need the money in their tax advantaged accounts for day to day expenses. So, yeah, the SECURE act gives them two more years to move money around. They haven't stopped bellyacheing yet... ::eye roll:: (oh and if I hear how the taxes being paid on the TAX DIFFERED money is the government taking their "hard earned money" one more time - someone may get hit in the head with a two by four. ) Wealthy Old People. Lol. We had dinner with my parents and they were complaining that they had "so much money" that they didn't know what to do with it. They also complained about taxes because they forgot to do something one year and it ended up costing them big time. I could hear the tiny, whiney violins playing them a sad song. 😂to I'd probably be more sympathetic to someone who acknowledges it's "good problem to have" while complaining about the hardships of it. Because having to jump thru hoops for something that should be straight forward or "easy" sucks. I have a tough time coming up with sympathy for someone who's complaining about being taken advantage of/being poor/being screwed over by the Government when none of those conditions are in effect. It's like someone angrily complaining that they can't take their brand new Ferrari for a drive because it looks like rain and they don't want it to get wet. They'd probably throw some blame for their misfortune at the weatherman, too. Yeah. OK.
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Deleted
Joined: Mar 28, 2024 18:05:40 GMT -5
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Post by Deleted on Jan 16, 2020 12:13:09 GMT -5
Yeah, it's the unevenness of maximums that gets me. When I crossed into executive territory, I got stock options. AND, I have access to some kind of account where I can stash more than the $19k 401k limit in order to make sure that I get the full 5% company match on my salary. I can't say that I follow it all and don't really need to because it's not until the $380k+ salary mark where that becomes an issue (19,000/.05). I'm 'only' creeping up to $200k and no plans to move further. Just seems weird to me that people with high incomes that already make it easier to save get even more money 'thrown' at them. I found once a person hits Director level the perks start to really climb and VP is insane. I worked somewhere with a Defined Contribution Pension that while for everyone, the pot really got sweet the higher your salary got, and that was on top of the 401k match.
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teen persuasion
Senior Member
Joined: Dec 20, 2010 21:58:49 GMT -5
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Post by teen persuasion on Jan 16, 2020 14:28:14 GMT -5
Yeah, it's the unevenness of maximums that gets me. When I crossed into executive territory, I got stock options. AND, I have access to some kind of account where I can stash more than the $19k 401k limit in order to make sure that I get the full 5% company match on my salary. I can't say that I follow it all and don't really need to because it's not until the $380k+ salary mark where that becomes an issue (19,000/.05). I'm 'only' creeping up to $200k and no plans to move further. Just seems weird to me that people with high incomes that already make it easier to save get even more money 'thrown' at them. I found once a person hits Director level the perks start to really climb and VP is insane. I worked somewhere with a Defined Contribution Pension that while for everyone, the pot really got sweet the higher your salary got, and that was on top of the 401k match. Even before these extra perks that only exist for execs, I hate the way the matching is usually defined, based on a percentage of your salary, not your contributions. For example, if a couple both work for the same employer, but one makes $30k and the other makes $300k. If both are over age 50, both can contribute $26k to a 401k. If the match is up to 5% of their salary, the lower earner's match is $1.5k, while the higher earner's match is $15k! They contributed the same, why isn't the match the same? Generally in our progressive financial system, the higher earners pay a higher tax rate, or have benefits phased out at a higher rate than the lower earner, on the basis that the lower earner has less disposable income, and the higher earner has more disposable income. Income tax - rates increase with increasing income. Social security - below first bend point, 90% income replacement; above first bend point, 32% ; above second bend point, 15% (decreasing return from greater total earnings). Financial aid - expected family contribution rates increase like tax rates increase at higher incomes. But for matching retirement funds, lower earners get a fraction of what higher earners do, even if contributing the same total? Why not make matching a percentage of contributions, period?
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hoops902
Senior Associate
Joined: Dec 22, 2010 13:21:29 GMT -5
Posts: 11,978
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Post by hoops902 on Jan 16, 2020 14:39:11 GMT -5
I found once a person hits Director level the perks start to really climb and VP is insane. I worked somewhere with a Defined Contribution Pension that while for everyone, the pot really got sweet the higher your salary got, and that was on top of the 401k match. Even before these extra perks that only exist for execs, I hate the way the matching is usually defined, based on a percentage of your salary, not your contributions. For example, if a couple both work for the same employer, but one makes $30k and the other makes $300k. If both are over age 50, both can contribute $26k to a 401k. If the match is up to 5% of their salary, the lower earner's match is $1.5k, while the higher earner's match is $15k! They contributed the same, why isn't the match the same? Generally in our progressive financial system, the higher earners pay a higher tax rate, or have benefits phased out at a higher rate than the lower earner, on the basis that the lower earner has less disposable income, and the higher earner has more disposable income. Income tax - rates increase with increasing income. Social security - below first bend point, 90% income replacement; above first bend point, 32% ; above second bend point, 15% (decreasing return from greater total earnings). Financial aid - expected family contribution rates increase like tax rates increase at higher incomes. But for matching retirement funds, lower earners get a fraction of what higher earners do, even if contributing the same total? Why not make matching a percentage of contributions, period?The middle class would HATE this honestly. If people get out of the habit of thinking of perks as "free things" from their employer, and start thinking about how it really is which is part of your compensation...the answer becomes clear (in a few ways, one that benefits the employer and one that benefits the employee). For the employer, it's a simple way to keep the budget in line. If I know I match up to 5% of salaries, I know my obligation at most will be 5% of all salary expenditure. I also know that's a relatively low number, so I can assume a pretty high participation level. If I assume $15k per employee...I have to know a lot of employees can't give up $15k every year (especially when I go into the employee side of it shortly), so I have no earthly idea what my liability to this might be. On the employee side. If you make $30k/year, and have a 5% match up to $1.5k, then your compensation is $31.5k (for salary plus 401k match, let's ignore other benefits which conceivably would stay the same). If you now want a match up to $15k, that means your overall compensation stays the same, which means 31.5k-15k+16K new salary. Do you want to give up an extra $13.5k in salary to get $13.5k in 401k match? Or even give up $10k for 13.5k in 401k match. Most people don't. People in general want their compensation in dollars, not matching dollars. People who make less money can't AFFORD to have their compensation given to them in a way they can't immediately access (in general, YM is an exception where people save tons of their pay).
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Deleted
Joined: Mar 28, 2024 18:05:40 GMT -5
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Post by Deleted on Jan 16, 2020 14:46:54 GMT -5
On the employee side. If you make $30k/year, and have a 5% match up to $1.5k, then your compensation is $31.5k (for salary plus 401k match, let's ignore other benefits which conceivably would stay the same). If you now want a match up to $15k, that means your overall compensation stays the same, which means 31.5k-15k+16K new salary. Do you want to give up an extra $13.5k in salary to get $13.5k in 401k match? Or even give up $10k for 13.5k in 401k match. Most people don't. People in general want their compensation in dollars, not matching dollars. People who make less money can't AFFORD to have their compensation given to them in a way they can't immediately access (in general, YM is an exception where people save tons of their pay). Hell yes! That would be awesome!
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teen persuasion
Senior Member
Joined: Dec 20, 2010 21:58:49 GMT -5
Posts: 4,026
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Post by teen persuasion on Jan 16, 2020 19:38:28 GMT -5
Even before these extra perks that only exist for execs, I hate the way the matching is usually defined, based on a percentage of your salary, not your contributions. For example, if a couple both work for the same employer, but one makes $30k and the other makes $300k. If both are over age 50, both can contribute $26k to a 401k. If the match is up to 5% of their salary, the lower earner's match is $1.5k, while the higher earner's match is $15k! They contributed the same, why isn't the match the same? Generally in our progressive financial system, the higher earners pay a higher tax rate, or have benefits phased out at a higher rate than the lower earner, on the basis that the lower earner has less disposable income, and the higher earner has more disposable income. Income tax - rates increase with increasing income. Social security - below first bend point, 90% income replacement; above first bend point, 32% ; above second bend point, 15% (decreasing return from greater total earnings). Financial aid - expected family contribution rates increase like tax rates increase at higher incomes. But for matching retirement funds, lower earners get a fraction of what higher earners do, even if contributing the same total? Why not make matching a percentage of contributions, period?The middle class would HATE this honestly. If people get out of the habit of thinking of perks as "free things" from their employer, and start thinking about how it really is which is part of your compensation...the answer becomes clear (in a few ways, one that benefits the employer and one that benefits the employee). For the employer, it's a simple way to keep the budget in line. If I know I match up to 5% of salaries, I know my obligation at most will be 5% of all salary expenditure. I also know that's a relatively low number, so I can assume a pretty high participation level. If I assume $15k per employee...I have to know a lot of employees can't give up $15k every year (especially when I go into the employee side of it shortly), so I have no earthly idea what my liability to this might be. On the employee side. If you make $30k/year, and have a 5% match up to $1.5k, then your compensation is $31.5k (for salary plus 401k match, let's ignore other benefits which conceivably would stay the same). If you now want a match up to $15k, that means your overall compensation stays the same, which means 31.5k-15k+16K new salary. Do you want to give up an extra $13.5k in salary to get $13.5k in 401k match? Or even give up $10k for 13.5k in 401k match. Most people don't. People in general want their compensation in dollars, not matching dollars. People who make less money can't AFFORD to have their compensation given to them in a way they can't immediately access (in general, YM is an exception where people save tons of their pay). Well, this middle class person hates the fact that someone making 10* what I do gets 10* the match for the same contribution. That's rubbing salt in the wound of the extreme inequality of our base salaries. As for figuring employer obligations, I'd suggest a cap for individual matches. I'd guess that employers don't give everyone $15k matches because that gets expensive, but if only a few employees are even eligible for that level, and most are only eligible for the lower match level, the total is manageable. It SOUNDS fair, to match your contributions up to 5% of your salary. But people don't do the math to see the discrepancy. Say an employer has 100 employees, 10 high paid ($300k) and the remaining 90 low paid ($30k), and they have a 5% match. If everyone at least contributes to the match, that's 10*$15k + 90*$1.5k = $285k max obligation. If they changed it to matching contributions (regardless of salary) to a max of $2.85k each, that's the same max obligation. But everyone gets the same max match. Lower earners would now get nearly twice the match (and on a reasonable contribution rate) Those poor high earners lose a huge chunk of their former match, though. Bet they'd hate that. Hmm, who do you suppose are formulating these policies? If the higher earners want to grant themselves larger matches, they'd need to grant everyone larger matches. Yes, chances are most lower earners couldn't afford to contribute enough to earn the full match, but why stoke their resentment by teasing them with unattainable benefits. Better to define "fair" differently and keep the lower earners grateful for the percentage they can get in matching.
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thyme4change
Community Leader
Joined: Dec 26, 2010 13:54:08 GMT -5
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Post by thyme4change on Jan 16, 2020 21:25:33 GMT -5
Lol. We had dinner with my parents and they were complaining that they had "so much money" that they didn't know what to do with it. They also complained about taxes because they forgot to do something one year and it ended up costing them big time. I could hear the tiny, whiney violins playing them a sad song. 😂to I'd probably be more sympathetic to someone who acknowledges it's "good problem to have" while complaining about the hardships of it. Because having to jump thru hoops for something that should be straight forward or "easy" sucks. I have a tough time coming up with sympathy for someone who's complaining about being taken advantage of/being poor/being screwed over by the Government when none of those conditions are in effect. It's like someone angrily complaining that they can't take their brand new Ferrari for a drive because it looks like rain and they don't want it to get wet. They'd probably throw some blame for their misfortune at the weatherman, too. Yeah. OK. My parents did acknowledge their lives are great. I would be irritated too if I missed some rule and ended up paying 40k more in taxes, too.
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hoops902
Senior Associate
Joined: Dec 22, 2010 13:21:29 GMT -5
Posts: 11,978
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Post by hoops902 on Jan 17, 2020 8:48:48 GMT -5
The middle class would HATE this honestly. If people get out of the habit of thinking of perks as "free things" from their employer, and start thinking about how it really is which is part of your compensation...the answer becomes clear (in a few ways, one that benefits the employer and one that benefits the employee). For the employer, it's a simple way to keep the budget in line. If I know I match up to 5% of salaries, I know my obligation at most will be 5% of all salary expenditure. I also know that's a relatively low number, so I can assume a pretty high participation level. If I assume $15k per employee...I have to know a lot of employees can't give up $15k every year (especially when I go into the employee side of it shortly), so I have no earthly idea what my liability to this might be. On the employee side. If you make $30k/year, and have a 5% match up to $1.5k, then your compensation is $31.5k (for salary plus 401k match, let's ignore other benefits which conceivably would stay the same). If you now want a match up to $15k, that means your overall compensation stays the same, which means 31.5k-15k+16K new salary. Do you want to give up an extra $13.5k in salary to get $13.5k in 401k match? Or even give up $10k for 13.5k in 401k match. Most people don't. People in general want their compensation in dollars, not matching dollars. People who make less money can't AFFORD to have their compensation given to them in a way they can't immediately access (in general, YM is an exception where people save tons of their pay). Well, this middle class person hates the fact that someone making 10* what I do gets 10* the match for the same contribution. That's rubbing salt in the wound of the extreme inequality of our base salaries. As for figuring employer obligations, I'd suggest a cap for individual matches. I'd guess that employers don't give everyone $15k matches because that gets expensive, but if only a few employees are even eligible for that level, and most are only eligible for the lower match level, the total is manageable. It SOUNDS fair, to match your contributions up to 5% of your salary. But people don't do the math to see the discrepancy. Say an employer has 100 employees, 10 high paid ($300k) and the remaining 90 low paid ($30k), and they have a 5% match. If everyone at least contributes to the match, that's 10*$15k + 90*$1.5k = $285k max obligation. If they changed it to matching contributions (regardless of salary) to a max of $2.85k each, that's the same max obligation. But everyone gets the same max match. Lower earners would now get nearly twice the match (and on a reasonable contribution rate) Those poor high earners lose a huge chunk of their former match, though. Bet they'd hate that. Hmm, who do you suppose are formulating these policies? If the higher earners want to grant themselves larger matches, they'd need to grant everyone larger matches. Yes, chances are most lower earners couldn't afford to contribute enough to earn the full match, but why stoke their resentment by teasing them with unattainable benefits. Better to define "fair" differently and keep the lower earners grateful for the percentage they can get in matching. You seem to be treating "the match" as if it's some extra thing though, it's not, it's just a piece of overall compensation. So if you remove say $10k from a highly paid person's match, they're simply going to get that $10k as cash. And you're not going to give lower-paid employees MORE match without deducting it from their cash pay. Someone who is worth $30k isn't suddenly worth $40k just because you're paying it out as employer 401k match. High earners and people running the company would LOVE your plan to even out people's contributions. All of a sudden high earners get an increase in their paycheck as less of their total compensation comes via 401k match, and lower employees (of whom there are FAR more) get lower paychecks and higher compensation in the form of 401k match which isn't guaranteed they'll take. Your complaint doesn't seem to have anything to do with 401k match honestly. It seems like your complaint is that you simply want to redistribute income from higher paid employees to lower ones, a simple change of how 401k matches work won't do that, because there's no reason a change to 401k match would change the total compensation package of an employee. In your example, if you're a $30k employee with a 5% match (worth $1.5k, total of $31.5 compensation). If you now get a $2.85k match, you're still a $31.5k employee, but your base pay decreases to $28.65k. Anything other than that isn't really relevant to 401k matching, it's a redistribution of salary (which could happen via 401k match or a straightforward salary change).
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gs11rmb
Senior Member
Joined: Dec 21, 2010 12:43:39 GMT -5
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Post by gs11rmb on Jan 17, 2020 10:08:23 GMT -5
I until I read this thread I had no idea that some companies paid out match as a % of salary. I thought everyone's match was a % of contributions.
I definitely learn things on YMAM!
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hoops902
Senior Associate
Joined: Dec 22, 2010 13:21:29 GMT -5
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Post by hoops902 on Jan 17, 2020 10:13:49 GMT -5
I until I read this thread I had no idea that some companies paid out match as a % of salary. I thought everyone's match was a % of contributions. I definitely learn things on YMAM! Well it's usually both. For example, we match 50% of contributions up to 6% of your salary. Most companies who match (50%, 100%, etc) have a limit, and that limit is the % of your salary.
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