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Post by Deleted on Oct 31, 2014 8:24:31 GMT -5
IRA holds no tax advantage for me. Even ROTH IRA's? My company offers ROTH 401k and if it wasn't for the tax advantage of a 401k that we need right now I would definitely consider the ROTH 401k. Maybe down the road: 18k/year to grow tax free .... Oh Lordy! A good way to diversify your holdings... That's the piece that made my eyes pop out when I projected it out, our 46k/year going into the Roth is going to generate a mind boggling income all tax free at the end.
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Miss Tequila
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Post by Miss Tequila on Oct 31, 2014 8:27:35 GMT -5
This is a money board...I would assume that we have higher than average incomes and higher than average investments. I'm guessing most of us on here actually ARE maxing out... I would not guess that. It takes a lot of money to max out. A lot. I wasn't clear...I'm assuming that the majority of people on here saying they are maxing out are maxing out. I realize that not everyone on here has the ability to do so.
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midjd
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Post by midjd on Oct 31, 2014 8:35:00 GMT -5
Yeah, and I don't see that many say they are maxing out everything... They'll say "I'm maxing my 401(k)," Roth, etc.
My HH income is pretty average by YM standards, but we manage to max my 457, both Roths, FSA, and HSA -- everything but DH's 401(k). It's not impossible.
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Deleted
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Post by Deleted on Oct 31, 2014 8:38:06 GMT -5
Plus maxing out is different for everyone. Some people only have access to an IRA, so $5500 is maxing out retirement savings. Some have the whole nine yards as available, 401K, IRA, HSA...
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Post by Deleted on Oct 31, 2014 8:41:17 GMT -5
What are we talking about here? 401k 401k + ROTH 401k + ROTH + HSA I think on this board different people have different views on what maxing truly is. IMHO an HSA is not a retirement account. It is a medical savings accounts. But it is still tax-preferred and possibly the best retirement savings option as the only one that saves on taxes three ways.
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movingforward
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Post by movingforward on Oct 31, 2014 8:46:39 GMT -5
Even ROTH IRA's? My company offers ROTH 401k and if it wasn't for the tax advantage of a 401k that we need right now I would definitely consider the ROTH 401k. Maybe down the road: 18k/year to grow tax free .... Oh Lordy! A good way to diversify your holdings... That's the piece that made my eyes pop out when I projected it out, our 46k/year going into the Roth is going to generate a mind boggling income all tax free at the end. You will still have a RMD you have to meet and you will have to pay taxes on income. It is not just going to be completely tax free money.
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teen persuasion
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Post by teen persuasion on Oct 31, 2014 8:55:17 GMT -5
That's the piece that made my eyes pop out when I projected it out, our 46k/year going into the Roth is going to generate a mind boggling income all tax free at the end. You will still have a RMD you have to meet and you will have to pay taxes on income. It is not just going to be completely tax free money. If aj is doing all Roth, there are no RMDs and no taxes at the end, ever. He's paying the taxes now, up front.
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movingforward
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Post by movingforward on Oct 31, 2014 8:59:34 GMT -5
You will still have a RMD you have to meet and you will have to pay taxes on income. It is not just going to be completely tax free money. If aj is doing all Roth, there are no RMDs and no taxes, ever. He's paying the taxes now, up front. Even on the 401K? WOW! Okay, for some reason I was thinking there was an RMD on all retirement plans. If not then that IS a sweet deal. Some how I can imagine the government not changing this in the future though.
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ArchietheDragon
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Post by ArchietheDragon on Oct 31, 2014 9:04:31 GMT -5
IMHO an HSA is not a retirement account. It is a medical savings accounts. But it is still tax-preferred and possibly the best retirement savings option as the only one that saves on taxes three ways. yes. I still don't consider it a retirement account.
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teen persuasion
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Post by teen persuasion on Oct 31, 2014 9:04:51 GMT -5
If aj is doing all Roth, there are no RMDs and no taxes, ever. He's paying the taxes now, up front. Even on the 401K? WOW! Okay, for some reason I was thinking there was an RMD on all retirement plans. If not then that IS a sweet deal. Some how I can imagine the government not changing this in the future though. I think you are correct, if left in the 401k there are RMDs, but you just need to roll it to a Roth IRA. Good detail to check on.
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Deleted
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Post by Deleted on Oct 31, 2014 9:06:32 GMT -5
If aj is doing all Roth, there are no RMDs and no taxes, ever. He's paying the taxes now, up front. Even on the 401K? WOW! Okay, for some reason I was thinking there was an RMD on all retirement plans. If not then that IS a sweet deal. Some how I can imagine the government not changing this in the future though. There are RMD's on the Roth 401k but not if you roll it over to a Roth IRA.
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movingforward
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Post by movingforward on Oct 31, 2014 9:06:51 GMT -5
![](http://syonidv.hodginsmedia.com/vsmileys/yeahthat.gif) Throughout history there are elderly people who have survived on very little money. They share housing, go to food banks, have pot lucks for entertainment, etc. This is nothing new. I guess the only concern seems to be that there are just going to MORE of these people than in previous years. I am not a sky is falling type of person so all the doomsday talk just gets old IMO. ETA: I think I am getting my threads mixed up. When I said doomsday talk I was actually thinking about the thread on "what we are going to do with all the ants." Some on that thread seemed to indicate the world is going to collapse.
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Ryan
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Post by Ryan on Oct 31, 2014 9:08:54 GMT -5
Most gurus will say to maximize your retirement savings, so if you're doing up to the limits then you feel like you're doing your job. Even though most people on here say they are maxing their 401k, I kinda doubt that many of them ACTUALLY are. Or they haven't been doing it for that long or consistently. I only say this because the retirement savings balances don't seem to jive with someone maxing out a 401k. My employer is pretty generous and probably kicks in $6K per year and I can put in $17,500. We have a business in my wife's name so she can put in $17,500 there plus 25% of her salary as profit sharing (max $51K) for an additional $12K. And since she's a teacher, she has a pension where she contributs 10% of her salary. So all in all, I can contribute $53K and, if I get my income down enough, more towards a ROTH. I'm 36 and have about 400K saved plus my wife has 12 years into a state pension. I'm not worried about retirement in the least since I know it'll only pick up from here on out. The only thing that holds me back is having to pay penalties in case I need the money out of a retirement account. I have reserves, but you never know what could happen. This is a money board...I would assume that we have higher than average incomes and higher than average investments. I'm guessing most of us on here actually ARE maxing out... They might be above average in terms of attentiveness to personal finance, but it takes a lot more than that. If you make $100K/year (way more than average), it'll take a 17.5% contribution (way more than average) to max out your 401k. Even a strong average salary of $65K would mean you'd need to put 27% away to hit the max. I've seen a lot of people post that they max out their 401k. But none of the other stuff really jives with what you'd expect....salaries, retirement balances, % contributed. Now if you head over to bogleheads or something, then it makes sense if you believe everything reported. The incomes reported and retirement balances are both very very big. When I check my progress on savings, I'm WAY ahead of schedule. But I have never maxed out my 401k....most years I didn't even come close. So all these people who max them out, their savings should be through the stratosphere. And when I see people reporting that kind of stuff, it doesn't seem to be the case.
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cronewitch
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Post by cronewitch on Oct 31, 2014 9:31:04 GMT -5
I have always maxed out but until 2003 it was 15% for 401K and most of the 80s and 90s a IRA was 2K, I usually didn't have a 401K. I have been over 50 for 16 years so from 2003 my max has been over 20K a year. It was a lot of money, I lived in poverty putting about 50% of my pay in retirement savings, but I knew it was short term and I had other income.
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TheHaitian
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Post by TheHaitian on Oct 31, 2014 9:36:45 GMT -5
This is a money board...I would assume that we have higher than average incomes and higher than average investments. I'm guessing most of us on here actually ARE maxing out... They might be above average in terms of attentiveness to personal finance, but it takes a lot more than that. If you make $100K/year (way more than average), it'll take a 17.5% contribution (way more than average) to max out your 401k. Even a strong average salary of $65K would mean you'd need to put 27% away to hit the max. I've seen a lot of people post that they max out their 401k. But none of the other stuff really jives with what you'd expect....salaries, retirement balances, % contributed. Now if you head over to bogleheads or something, then it makes sense if you believe everything reported. The incomes reported and retirement balances are both very very big. When I check my progress on savings, I'm WAY ahead of schedule. But I have never maxed out my 401k....most years I didn't even come close. So all these people who max them out, their savings should be through the stratosphere. And when I see people reporting that kind of stuff, it doesn't seem to be the case. You also have to consider how long they have been maxing. Next year will be the first year I actually max or come close to it... Before that we stopped contributing to save 30k downpayment for a house, and aggressively for a year or two before that. My wife did not start her first professional job till she was 25 (4 years undergrad + 2 years grad; me at 23) and between her and I you can count about 2 years of unemployment between the two of us in the past 5 years or living off 1 income if any. So if next year at 30 I may say: I maxed my 401k and yet you expect a big amount you would be disappointed. It is the same when someone comes on here and say they make X amount combined and people take a dig at their savings account balance or 401k balance. Ok, they just got a big promotion recently and just started to make that money... You expect their savings account to also double or triple during that short time? Ex: a friend went from 50k as a resident to over 200k as an attending. He still had $100 in his bank account his first day making 200k ETA: also you have a side business bringing in more than you actual job if I remember correctly (most people here don't) so your savings will out space most. 400k at 35 (I think) is quite admirable and way ahead of average, I would think 100k like WBBG at 35 in retirement savings is more along the lines of average:
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teen persuasion
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Post by teen persuasion on Oct 31, 2014 9:39:16 GMT -5
I don't know why it matters if the limit is higher than you think you need. ![](http://syonidv.hodginsmedia.com/vsmileys/idunno.gif) But, I don't think it's fair that people can put so much into a 401K, but not an IRA. There are a lot of people with no access to a 401K plan with their employer. I think they should up the amount allowed in IRAs and set a maximum limit for all tax-preferred accounts combined instead. If I didn't have a 401K I'd be pissed. Why should where you work determine how much of a break you can get on your taxes for saving for retirement? ![](http://syonidv.hodginsmedia.com/vsmileys/yeahthat.gif) and to add insult to injury: even if you don't have a 401k at work you can still only save $5,500 in either an IRA or a Roth IRA. While I with my 401k can max that out AND put money in a Roth IRA. Since I'm old that means I can and do save $29.5k before employer match of $4k and a one-time-only additional match of $5k this year. The $5k is a result of them freezing our pensions (did I mention we alsoused to have a contributory pension up until last year?) and as a sweetener for taking that away they were going to pay us an additional percentage to our 401k. That lasted all of 4 weeks after the announcement and then it became the one-time-only thing ![](http://syonidv.hodginsmedia.com/vsmileys/angry2.png) Something I've noticed from many comments on this forum and MMM's forum is that retirement account options are generally much better for better paid workers. Not within a company, but in general. Low paying fields/jobs are more likely to have no 401k, or a barebones one with no match and expensive funds. As income increases, options and matches increase. And why are matches tied to a percentage of your pay? Lower incomes get a lesser benefit once again. Four percent match on $35k salary is only $1400, while four percent match on $120k is $4800. Which employee needs more incentive to save in retirement accounts? It would be more fair to match employee contributions up to a certain $ amount, instead. It can certainly feel like the deck is stacked, at times.
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Deleted
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Post by Deleted on Oct 31, 2014 9:41:20 GMT -5
So maybe a good business idea is a 'hookup' space for seniors looking for roommates.
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Post by Deleted on Oct 31, 2014 9:44:13 GMT -5
This is a money board...I would assume that we have higher than average incomes and higher than average investments. I'm guessing most of us on here actually ARE maxing out... They might be above average in terms of attentiveness to personal finance, but it takes a lot more than that. If you make $100K/year (way more than average), it'll take a 17.5% contribution (way more than average) to max out your 401k. Even a strong average salary of $65K would mean you'd need to put 27% away to hit the max. I've seen a lot of people post that they max out their 401k. But none of the other stuff really jives with what you'd expect....salaries, retirement balances, % contributed. Now if you head over to bogleheads or something, then it makes sense if you believe everything reported. The incomes reported and retirement balances are both very very big. When I check my progress on savings, I'm WAY ahead of schedule. But I have never maxed out my 401k....most years I didn't even come close. So all these people who max them out, their savings should be through the stratosphere. And when I see people reporting that kind of stuff, it doesn't seem to be the case. I've only been maxing it for the last 5 years or so, mainly to get my taxable income down. I'm also maxing my HSA (part of that is employer contribution)....and next year I will max both (even with the 401k catch-up contribution), again to lower my taxable income as much as possible.
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HoneyBBQ
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Post by HoneyBBQ on Oct 31, 2014 9:44:48 GMT -5
I guess this thread speaks to me. We max our 401s. We have employer contributions that are large. My H has catch up, plus he has the highly compensated employee bonus. Plus he has the family HSA. So, yeah. I think it was around 75k a year or something last time I checked (we do not do IRAS/not eligible for Roth). That is what makes me think we are getting subsidized to become rich, we won't end up with a couple million, but 7-8 million in today's dollars if my current projections play out. I don't know how old you are, but 7-8 mil might be just enough to make you richly comfortable when you retire. Not even close to the upper crust. The people that "have" to contribute to retirement accounts are not the truly wealthy. You might break the top 1%, but you're not going to have servants and a private jet.
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Deleted
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Post by Deleted on Oct 31, 2014 9:46:03 GMT -5
They might be above average in terms of attentiveness to personal finance, but it takes a lot more than that. If you make $100K/year (way more than average), it'll take a 17.5% contribution (way more than average) to max out your 401k. Even a strong average salary of $65K would mean you'd need to put 27% away to hit the max. I've seen a lot of people post that they max out their 401k. But none of the other stuff really jives with what you'd expect....salaries, retirement balances, % contributed. Now if you head over to bogleheads or something, then it makes sense if you believe everything reported. The incomes reported and retirement balances are both very very big. When I check my progress on savings, I'm WAY ahead of schedule. But I have never maxed out my 401k....most years I didn't even come close. So all these people who max them out, their savings should be through the stratosphere. And when I see people reporting that kind of stuff, it doesn't seem to be the case. You also have to consider how long they have been maxing. Next year will be the first year I actually max or come close to it... Before that we stopped contributing to save 30k downpayment for a house, and aggressively for a year or two before that. My wife did not start her first professional job till she was 25 (4 years undergrad + 2 years grad; me at 23) and between her and I you can count about 2 years of unemployment between the two of us in the past 5 years or living off 1 income if any. So if next year at 30 I may say: I maxed my 401k and yet you expect a big amount you would be disappointed. It is the same when someone comes on here and say they make X amount combined and people take a dig at their savings account balance or 401k balance. Ok, they just got a big promotion recently and just started to make that money... You expect their savings account to also double or triple during that short time? Ex: a friend went from 50k as a resident to over 200k as an attending. He still had $100 in his bank account his first day making 200k The complaint about the allowed retirement savings amounts being too high assumes that someone is maxing out IRA/401K for their entire working career. In reality I doubt this rarely ever is the case, because as pp stated, they'd have some major cha ching. More likely it seems what happens is people save less when they're younger, have "bad" years when they can't save much or at all and have years when they a ton in to catch up. Then you have them hitting their 50's when income is typically the highest pushing to max everything. The high limits facilitate the catching up more than the getting rich.
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NastyWoman
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Post by NastyWoman on Oct 31, 2014 9:50:54 GMT -5
There will always be differences in the amounts that one can or will safe. And since this thread is about whether the limits are too much or not enough I will add that to even things up a little we should have one limit for all retirements accounts. The limit should include personal contributions as well as any potential matching. So if your employer does not offer a match or a 401k or something like that, you would be able to safe that money in an IRA, not just the measly $5.5k you were limited to this year. Anyone who would like to safe more can do so in taxable accounts.
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TheHaitian
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Post by TheHaitian on Oct 31, 2014 9:55:17 GMT -5
You also have to consider how long they have been maxing. Next year will be the first year I actually max or come close to it... Before that we stopped contributing to save 30k downpayment for a house, and aggressively for a year or two before that. My wife did not start her first professional job till she was 25 (4 years undergrad + 2 years grad; me at 23) and between her and I you can count about 2 years of unemployment between the two of us in the past 5 years or living off 1 income if any. So if next year at 30 I may say: I maxed my 401k and yet you expect a big amount you would be disappointed. It is the same when someone comes on here and say they make X amount combined and people take a dig at their savings account balance or 401k balance. Ok, they just got a big promotion recently and just started to make that money... You expect their savings account to also double or triple during that short time? Ex: a friend went from 50k as a resident to over 200k as an attending. He still had $100 in his bank account his first day making 200k The complaint about the allowed retirement savings amounts being too high assumes that someone is maxing out IRA/401K for their entire working career. In reality I doubt this rarely ever is the case, because as pp stated, they'd have some major cha ching. More likely it seems what happens is people save less when they're younger, have "bad" years when they can't save much or at all and have years when they a ton in to catch up. Then you have them hitting their 50's when income is typically the highest pushing to max everything. The high limits facilitate the catching up more than the getting rich. Exactly!!! I believe another poster that is looking at retiring with her husband put it well: it wasn't till they were 50, kids gone, house paid off and income at their highest that they were able to max everything and then some. The bulk of their savings was made during that period. Before that they were busy dealing with life. Next year I hope to finally be able to max mine for once but if we have a baby and things get tight, that sucker is getting reduced to a manageable amount. My wife is only doing the required ORP right now which is about ~10% of her gross + ~5% employer contributions - 0.5% costs to maintain the account.
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Post by Deleted on Oct 31, 2014 10:01:07 GMT -5
I guess this thread speaks to me. We max our 401s. We have employer contributions that are large. My H has catch up, plus he has the highly compensated employee bonus. Plus he has the family HSA. So, yeah. I think it was around 75k a year or something last time I checked (we do not do IRAS/not eligible for Roth). That is what makes me think we are getting subsidized to become rich, we won't end up with a couple million, but 7-8 million in today's dollars if my current projections play out. I don't know how old you are, but 7-8 mil might be just enough to make you richly comfortable when you retire. Not even close to the upper crust. The people that "have" to contribute to retirement accounts are not the truly wealthy. You might break the top 1%, but you're not going to have servants and a private jet. My projection is 7-8 million in today's dollars, inflation adjusted is much more. My line in the sand is I don't think you should get a tax break on more than 3.4 million of today's dollars in retirement accounts, like the plan the White House submitted earlier in the year. Do you think it should be more or no cap at all?
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midjd
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Post by midjd on Oct 31, 2014 10:04:55 GMT -5
I think the number of people who use retirement accounts to "become rich" is much, much, much lower than the number of people who would not save at all for retirement if they thought there was a chance the government would take it/tax it (even if, in reality, they had no hope of getting to a level at which tax benefits were eliminated).
My state got rid of its estate tax -- er, I mean the "death tax" -- a few years back. There was a ton of public outrage at the idea of taxing someone's inheritance. Yet 99% of the people speaking out against the estate tax were never going to have (or inherit) a $1M+ estate, which was the level at which the tax kicked in. I suppose they could have been altruistically looking out for those to whom it did apply, but I'd almost guarantee it was because they truly believed their own estate would be taxed. Any tax on certain levels of retirement savings is going to get the same reaction, even from those who only save $50 a month.
IMO anything that can encourage people to save for retirement (tax benefits, etc.) is a good thing.
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movingforward
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Post by movingforward on Oct 31, 2014 10:07:22 GMT -5
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Post by Deleted on Oct 31, 2014 10:07:57 GMT -5
I guess this thread speaks to me. We max our 401s. We have employer contributions that are large. My H has catch up, plus he has the highly compensated employee bonus. Plus he has the family HSA. So, yeah. I think it was around 75k a year or something last time I checked (we do not do IRAS/not eligible for Roth).But everyone is eligible for a non-deductible IRA and you can immediately convert it to a Roth.
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teen persuasion
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Post by teen persuasion on Oct 31, 2014 10:17:36 GMT -5
I guess this thread speaks to me. We max our 401s. We have employer contributions that are large. My H has catch up, plus he has the highly compensated employee bonus. Plus he has the family HSA. So, yeah. I think it was around 75k a year or something last time I checked (we do not do IRAS/not eligible for Roth). I don't know how old you are, but 7-8 mil might be just enough to make you richly comfortable when you retire. Not even close to the upper crust. The people that "have" to contribute to retirement accounts are not the truly wealthy. You might break the top 1%, but you're not going to have servants and a private jet. My projection is 7-8 million in today's dollars, inflation adjusted is much more. My line in the sand is I don't think you should get a tax break on more than 3.4 million of today's dollars in retirement accounts, like the plan the White House submitted earlier in the year. Do you think it should be more or no cap at all? The devil's in the details. How exactly will this limit work? Wasn't the number tied to annuity rates, which was skewed due to current low interest rates? When you hit the max, are you just ineligible to add more to accounts, or what? Which accounts are included, and is it a sum of the balances? If your balance drops below the magic number (you withdraw some, market tanks, rates change the magic number calculation), are you eligible again? Honestly, as someone who has no access to a 401k, but hope to someday, I'd rather NOT restrict things more. I'd like to even the playing field by giving everyone the max options, rather than trying to drop to the lowest common denominator.
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Deleted
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Post by Deleted on Oct 31, 2014 10:26:17 GMT -5
My projection is 7-8 million in today's dollars, inflation adjusted is much more. My line in the sand is I don't think you should get a tax break on more than 3.4 million of today's dollars in retirement accounts, like the plan the White House submitted earlier in the year. Do you think it should be more or no cap at all? The devil's in the details. How exactly will this limit work? Wasn't the number tied to annuity rates, which was skewed due to current low interest rates? When you hit the max, are you just ineligible to add more to accounts, or what? Which accounts are included, and is it a sum of the balances? If your balance drops below the magic number (you withdraw some, market tanks, rates change the magic number calculation), are you eligible again? Honestly, as someone who has no access to a 401k, but hope to someday, I'd rather NOT restrict things more. I'd like to even the playing field by giving everyone the max options, rather than trying to drop to the lowest common denominator. All very good questions I don't have the answers to. I think the 3.4 would be of all tax advantaged accounts without considering other assets. And I agree with you on the access point, I said in the other thread 401k's should go away and everyone should be able to contribute the same amount in an IRA.
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Post by Deleted on Oct 31, 2014 10:36:51 GMT -5
I guess this thread speaks to me. We max our 401s. We have employer contributions that are large. My H has catch up, plus he has the highly compensated employee bonus. Plus he has the family HSA. So, yeah. I think it was around 75k a year or something last time I checked (we do not do IRAS/not eligible for Roth). I don't know how old you are, but 7-8 mil might be just enough to make you richly comfortable when you retire. Not even close to the upper crust. The people that "have" to contribute to retirement accounts are not the truly wealthy. You might break the top 1%, but you're not going to have servants and a private jet. My projection is 7-8 million in today's dollars, inflation adjusted is much more. My line in the sand is I don't think you should get a tax break on more than 3.4 million of today's dollars in retirement accounts, like the plan the White House submitted earlier in the year. Do you think it should be more or no cap at all? And as has been pointed out, it's highly doubtful that this kind of savings in tax preferred accounts is common. Even those on here that are maxing their retirement accounts probably aren't looking at over 3.4 million per person, 6.8 million married,(at least not any of them over 35) because as it turns out, most have either just started saving at that rate and/or aren't using every account option.
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Post by Deleted on Oct 31, 2014 10:40:01 GMT -5
My projection is 7-8 million in today's dollars, inflation adjusted is much more. My line in the sand is I don't think you should get a tax break on more than 3.4 million of today's dollars in retirement accounts, like the plan the White House submitted earlier in the year. Do you think it should be more or no cap at all? And as has been pointed out, it's highly doubtful that this kind of savings in tax preferred accounts is common. Even those on here that are maxing their retirement accounts probably aren't looking at over 3.4 million per person, 6.8 million married,(at least not any of them over 35) because as it turns out, most have either just started saving at that rate and/or aren't using every account option. So you don't think there should be a cap?
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