The 401K Drives Inequality: NY Times article.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I work at a small bank that eliminated the pension around 2003. I heard if you worked there 40 years you got a full pension equal to your last salary. It is still funded but frozen in 2003. No new contributions.

They replaced it a 6 percent match in 401k. Some of the tellers and operations people don’t even put six percent in to get full match.

But that’s the point. All of the previous pension plans were too generous and therefore not sustainable. You can’t have someone work age 22-52, and then pay them a generous pension for 30-40 more years. And yet that’s what it was. Many people in the United States claim a pension longer than they ever worked for the place paying the pension. It’s mathematical insanity.

And yet this is what teachers have all over the country -- 30 year vestment so there are no teachers over the age of 52 or 53. Then they have 30 or 40 years of leisure. I think a seasoned teacher is infinitely more valuable than a 22 year old.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I work at a small bank that eliminated the pension around 2003. I heard if you worked there 40 years you got a full pension equal to your last salary. It is still funded but frozen in 2003. No new contributions.

They replaced it a 6 percent match in 401k. Some of the tellers and operations people don’t even put six percent in to get full match.

But that’s the point. All of the previous pension plans were too generous and therefore not sustainable. You can’t have someone work age 22-52, and then pay them a generous pension for 30-40 more years. And yet that’s what it was. Many people in the United States claim a pension longer than they ever worked for the place paying the pension. It’s mathematical insanity.

And yet this is what teachers have all over the country -- 30 year vestment so there are no teachers over the age of 52 or 53. Then they have 30 or 40 years of leisure. I think a seasoned teacher is infinitely more valuable than a 22 year old.

It's funny, that's exactly what happened to my older boomer mother. Taught for just under 30 years, took an accelerated buyout in her early 50s. Now coming up on 80 (still in good health, thankfully). Will end up costing our home state budget 35-40 years in pension and healthcare costs. She would have been an excellent teacher for at least another 10 years, and in fact did para-professional teaching in another district for a number of years after retiring from full-time teaching. Good for her, but it's a huge part of the reason why taxes have to rise sooner or later, but of course so many boomers agitate against it, because they don't have kids anymore!

[Anonymous]

Anonymous wrote:Gift article link:

https://www.nytimes.com/2024/05/08/magazine/401k-retirement-crisis.html?unlocked_article_code=1.qk0.FoXn.AmNofORfld_i&smid=url-share

The evidence seems clear. My family has won in this scenario as have many of those who post here. We have a federal pension along with a 401K that's been maxed out for over a decade, and was well-funded before that.

But, overall, for our society taking away pensions and making people save for retirement as a replacement seems to have been a poor plan. People don't plan or save for the future. Some can't, others just don't have the desire to, many others are living paycheck to paycheck whether because of low wages or poor planning.

We should never have left pensions behind.

Most of those who choose not to save/can't save in the past 20 years, likely don't have jobs where they'd have had a pension anyhow. Fast food/Panera/walmart type store never offered Pensions to hourly workers.

At some point, people have to be responsible for themselves and learn to save. As a govt we cannot keep bailing out people who are too stupid to help themselves.

[Anonymous]

Anonymous wrote:Social security is essentially a federal pension for all, the problem is that US culture doesn't support increasing contributions (in the form of taxes) in order to increase payouts, plus there are generational issues with this based on baby booms/busts.

But if you really wanted to make pensions universal, that's how you'd do it. Not by requiring or encouraging companies to provide them (as a PP noted, pensions can be very restrictive in terms of your career and you have to trust the company/government entity to actually fund it) but by making SS more robust so that people were essentially forced to save for their own retirement.

We should NOT increase contributions without increasing payouts to Everyone. Right now it stops at $170K, and anyone making $400K collects the same as someone making $170K. It should remain a contribution plan.

However, companies need to make 401K contributions the default. When my company changed from "opt in" to "opt out", most people who were not previously contributing stayed Opted in. We need to educate 20 somethings that they NEED to contribute as much as they can from the get go.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Gift article link:

https://www.nytimes.com/2024/05/08/magazine/401k-retirement-crisis.html?unlocked_article_code=1.qk0.FoXn.AmNofORfld_i&smid=url-share

The evidence seems clear. My family has won in this scenario as have many of those who post here. We have a federal pension along with a 401K that's been maxed out for over a decade, and was well-funded before that.

But, overall, for our society taking away pensions and making people save for retirement as a replacement seems to have been a poor plan. People don't plan or save for the future. Some can't, others just don't have the desire to, many others are living paycheck to paycheck whether because of low wages or poor planning.

We should never have left pensions behind.

So you want to work for One Company your whole life, and take a chance that they have funded the pension well, invested it well, won't bankrupt it, won't act fraudulently..... as opposed to being responsible for your own life, your career choices, work for one company, do a side gig to earn more when you are young, learn about investments, the market, and be responsible and accountable for your own retirement? Mmmk.

Vast majority of Americans are not intelligent enough to save for and invest in their retirement. Even very smart people get decision paralysis when it comes to investing. I had an extremely smart boss in the federal government who was 100% invested in G fund in the TSP after 15 years in gov't. Why? Because they were (irrationally) afraid of losing money. During the big market drop in 2020, I convinced them to convert half their G funds into C funds. Best decision ever. And that's a person with an undergrad degree from an Ivy and a JD from the T5 law school.

Most Americans really just need a more robust pension system. Let the investment professionals and actuaries manage it.

Someone's "stupidity" is not a reason for me to pay more in taxes. Basic investing/compounding concepts are not that difficult to understand. If a college educated person cannot understand that, it's not My fault. They will have a "much lesser" retirement than I will have. Ultimately people need to be responsible for themselves.

[Anonymous]

I think 401k savings should be mandatory instead of opt-in. Too many idiots who choose to save nothing and insist they need every bit of their money. If they never see it they won't miss it.
My best friend's mother saved nothing her entire career. She insisted she couldn't do without that 6% that her employer would have matched. But she always had money for tanning, hair appointments, nails, and new clothes. Now she is penniless and my friend is supporting her.

[Anonymous]

Anonymous wrote:Here it comes.

Socialist and borderline communist Dems will be coming after your 401ks soon all in the name of 'equity'.

Let's completely ignore how punishing it will be for savers who CHOSE out of self discipline to forgo consumption their entire lives in order to save more in their 401ks. This will reward all of the morons in life who bought multiple cars with payments over $1000 per month, who bought homes much bigger than tbeh could afford, and who had too many kids that they couldn't afford.

Once dems go down this communist path I will liquidate my entire savings and move the hell out. So sick and tired of Dem entitlement mentality that punishes everyone who is responsible and saves.

+1000

We saved as much as possible when younger. We drove older cars, we maxed our 401Ks (at least to get the full company match---meanwhile there were other highly educated 22 yo we worked with who didn't want to do the 401K, and we got an 8% company match), we've never had a $800 car payment, we saved for college, etc.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Switzerland is pretty cool when it comes to pensions. Companies MUST offer pensions, but the payout is based on how much the employee has contributed toward the pension and the principal + investments are managed by financial institutions/insurers/pension companies to ensure solvency. Essentially, the management of the pension is farmed out to 3rd parties who take on liability of ensuring pension payouts, rather than the employing company.

Good explanation here on the pension "pillars" in Switzerland: https://www.ch.ch/en/retirement/retirement-income/#further-information-and-useful-contacts

1st Pillar (state pension, akin to Social Security in the US): employee pays 4.35% of salary, employer pays 4.35%. Must pay into every year from age 20 to age 65 to get unreduced pension.

2nd Pillar (defined contribution & benefit company-provided pension): pension is based on amount contributed by employee and employer (split equally) during employment. Pension is paid annually at age 65 at minimum rate of 6.8% of final contribution balance until death. Spouse fully inherits pension, assuming conditions are met.

3rd pillar (optional supplementary pensions akin to 401K, Roth IRA, etc): two types of pensions available - 3.A. pension (max contribution of 7K per year, contributions are tax deductible, taxed upon withdrawal) and 3.B pension (no max contribution, no tax deduction, but no taxes levied when withdrawn near retirement).

All of this is managed by professional pension providers, so generally it's idiot-proof and in high-quality investments. The issue with 401Ks is that it relies on the employee to take actions and make smart investments. People lose money all the time by buying inflated stocks, chasing returns, selling at market bottom & locking in losses, etc. Private pensions should be much more prevalent in the U.S.

And this is why the Swiss hardly ever invent anything. Try working for a global corporation with sites in Europe. Europe overall is an absolute laughing stock of productivity. They take half the year off and are constantly a PITA to work with because they can never attend meetings since they're always on vacation and barely meet quality standards for output. That's why salaries in Europe are trash and their economy barely grows. Europe is a de facto nanny state where nobody works and yet they all expect some other entity to provide.

And in many European countries, it's impossible to Fire someone. An average employee (not an executive) can require pay out of over 1-2 years salary if you succeed in releasing them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Gift article link:

https://www.nytimes.com/2024/05/08/magazine/401k-retirement-crisis.html?unlocked_article_code=1.qk0.FoXn.AmNofORfld_i&smid=url-share

The evidence seems clear. My family has won in this scenario as have many of those who post here. We have a federal pension along with a 401K that's been maxed out for over a decade, and was well-funded before that.

But, overall, for our society taking away pensions and making people save for retirement as a replacement seems to have been a poor plan. People don't plan or save for the future. Some can't, others just don't have the desire to, many others are living paycheck to paycheck whether because of low wages or poor planning.

We should never have left pensions behind.

Most of those who choose not to save/can't save in the past 20 years, likely don't have jobs where they'd have had a pension anyhow. Fast food/Panera/walmart type store never offered Pensions to hourly workers.

At some point, people have to be responsible for themselves and learn to save. As a govt we cannot keep bailing out people who are [b]too stupid to help themselves[b].

We agree we need service workers at places like Panera and Walmart, right? And those jobs don't pay a lot, by their nature. So it's reasonable that it's very hard for people working there to be able to substantively save, without any employer match, and just because of general costs of living. It's not that they are "too stupid", it's that they don't have enough money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Here it comes.

Socialist and borderline communist Dems will be coming after your 401ks soon all in the name of 'equity'.

Let's completely ignore how punishing it will be for savers who CHOSE out of self discipline to forgo consumption their entire lives in order to save more in their 401ks. This will reward all of the morons in life who bought multiple cars with payments over $1000 per month, who bought homes much bigger than tbeh could afford, and who had too many kids that they couldn't afford.

Once dems go down this communist path I will liquidate my entire savings and move the hell out. So sick and tired of Dem entitlement mentality that punishes everyone who is responsible and saves.

+1000

We saved as much as possible when younger. We drove older cars, we maxed our 401Ks (at least to get the full company match---meanwhile there were other highly educated 22 yo we worked with who didn't want to do the 401K, and we got an 8% company match), we've never had a $800 car payment, we saved for college, etc.

Congratulations on making enough to max out your 401k at 22.

[Anonymous]

FWIW: I worked in fast food for 5 years. It's hard work. Physically. and people are mean to service workers so mentally. They should be paid more than MW. And if they work there for 40 years, sure a pension. WHy not? They won't live long. If that is their career, they have few options.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Switzerland is pretty cool when it comes to pensions. Companies MUST offer pensions, but the payout is based on how much the employee has contributed toward the pension and the principal + investments are managed by financial institutions/insurers/pension companies to ensure solvency. Essentially, the management of the pension is farmed out to 3rd parties who take on liability of ensuring pension payouts, rather than the employing company.

Good explanation here on the pension "pillars" in Switzerland: https://www.ch.ch/en/retirement/retirement-income/#further-information-and-useful-contacts

1st Pillar (state pension, akin to Social Security in the US): employee pays 4.35% of salary, employer pays 4.35%. Must pay into every year from age 20 to age 65 to get unreduced pension.

2nd Pillar (defined contribution & benefit company-provided pension): pension is based on amount contributed by employee and employer (split equally) during employment. Pension is paid annually at age 65 at minimum rate of 6.8% of final contribution balance until death. Spouse fully inherits pension, assuming conditions are met.

3rd pillar (optional supplementary pensions akin to 401K, Roth IRA, etc): two types of pensions available - 3.A. pension (max contribution of 7K per year, contributions are tax deductible, taxed upon withdrawal) and 3.B pension (no max contribution, no tax deduction, but no taxes levied when withdrawn near retirement).

All of this is managed by professional pension providers, so generally it's idiot-proof and in high-quality investments. The issue with 401Ks is that it relies on the employee to take actions and make smart investments. People lose money all the time by buying inflated stocks, chasing returns, selling at market bottom & locking in losses, etc. Private pensions should be much more prevalent in the U.S.

And this is why the Swiss hardly ever invent anything. Try working for a global corporation with sites in Europe. Europe overall is an absolute laughing stock of productivity. They take half the year off and are constantly a PITA to work with because they can never attend meetings since they're always on vacation and barely meet quality standards for output. That's why salaries in Europe are trash and their economy barely grows. Europe is a de facto nanny state where nobody works and yet they all expect some other entity to provide.

I'd happily trade the US inventing less for Swiss standards of living

[Anonymous]

Anonymous wrote:I work at a small bank that eliminated the pension around 2003. I heard if you worked there 40 years you got a full pension equal to your last salary. It is still funded but frozen in 2003. No new contributions.

They replaced it a 6 percent match in 401k. Some of the tellers and operations people don’t even put six percent in to get full match.

Once again, a person's stupidity is not my problem. It's a given that you should find every way possible to contribute up to the company match. Otherwise you are giving away income.

But instead people want to live paycheck to paycheck and consider wants as needs. I know people not taking company match who are driving $50K vehicles. Their choice, but I shouldn't have to fund their retirement because they are too dumb to do it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Gift article link:

https://www.nytimes.com/2024/05/08/magazine/401k-retirement-crisis.html?unlocked_article_code=1.qk0.FoXn.AmNofORfld_i&smid=url-share

The evidence seems clear. My family has won in this scenario as have many of those who post here. We have a federal pension along with a 401K that's been maxed out for over a decade, and was well-funded before that.

But, overall, for our society taking away pensions and making people save for retirement as a replacement seems to have been a poor plan. People don't plan or save for the future. Some can't, others just don't have the desire to, many others are living paycheck to paycheck whether because of low wages or poor planning.

We should never have left pensions behind.

Most of those who choose not to save/can't save in the past 20 years, likely don't have jobs where they'd have had a pension anyhow. Fast food/Panera/walmart type store never offered Pensions to hourly workers.

At some point, people have to be responsible for themselves and learn to save. As a govt we cannot keep bailing out people who are [b]too stupid to help themselves[b].

We agree we need service workers at places like Panera and Walmart, right? And those jobs don't pay a lot, by their nature. So it's reasonable that it's very hard for people working there to be able to substantively save, without any employer match, and just because of general costs of living. It's not that they are "too stupid", it's that they don't have enough money.

So you find a way to better yourself and make more money. Go to community college and work at night at a job. Learn a trade to better yourself. Or learn to live within your means. If you only bring in 35K/year, you need to find a way to live on only that and find a way to save some. Or you will be working at Walmart when you are 70. Not sorry---I know too many people living above their means.

Point is those people didn't have pensions before, but now they have Roth IRAs and possible 401Ks as a vehicle for saving. we shouldn't be removing means for people to save for retirement. We should be educating people about finances.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Here it comes.

Socialist and borderline communist Dems will be coming after your 401ks soon all in the name of 'equity'.

Let's completely ignore how punishing it will be for savers who CHOSE out of self discipline to forgo consumption their entire lives in order to save more in their 401ks. This will reward all of the morons in life who bought multiple cars with payments over $1000 per month, who bought homes much bigger than tbeh could afford, and who had too many kids that they couldn't afford.

Once dems go down this communist path I will liquidate my entire savings and move the hell out. So sick and tired of Dem entitlement mentality that punishes everyone who is responsible and saves.

+1000

We saved as much as possible when younger. We drove older cars, we maxed our 401Ks (at least to get the full company match---meanwhile there were other highly educated 22 yo we worked with who didn't want to do the 401K, and we got an 8% company match), we've never had a $800 car payment, we saved for college, etc.

Congratulations on making enough to max out your 401k at 22.

Ok---didn't "max" but made sure to get the 6%. We were in Tech (35 years ago). Every single person at the company could "afford" to get the 6% match, yet many did not.
And yes, we were paid well, but we also paid off 100K in student loans our first 5 years out of college. It's called living within your means. I drove an cheap older car without AC (despite living in an area that needed it) for 4 years, so we didn't have a $500 car payment and it could be directed to retirement and debt repayment. Our first apartment was not that nice---meanwhile we watched others live in places that were much nicer. Instead we focused on debt and retirement savings. It's all about choices.

And I'll argue, that you need to live below your means no matter what your salary is. If it's too low, then find a way to get a better job/work 2 jobs/etc. But the solution is not to spend more than you make and to not save for retirement.