Should 401ks be phased out?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ymillions of Americans don’t take advantage of tax-favored retirement savings − or can't. Nearly half of workers have no access to a retirement plan at work, according to one AARP analysis.

Ok? We don’t drag everyone else down because someone else’s employer doesn’t offer a 401k. That’s why IRAs were instituted. Or you could pass legislation requiring all employers to provide 401k access, the same as health insurance.

Crappy companies many employees can’t afford to contribute or they offer them but no match. Or the scam in high turnover retail give a match but do vesting period which 95 percent of retail store employees never get.

Also the match is worth more the more you make. A high earner in San Fran or NYC is in 40 percent tax bracket

The low income retail worker in Florida is in zero percent tax bracket.

Why does the high earner get a 40 percent tax saving on their contribution but low income a zero tax saving?

Because it's not a tax "cut," it's a tax deferral. The 40% tax bracket worker will eventually pay income taxes on the amount invested, plus any appreciation when they retire. It may result in a savings, if you're in a lower tax bracket when you're forced to take RMDs (many people aren't). If you're paying zero tax already, there are no taxes to defer. The employee can take their money, invest it, and when they retire, they'll only owe capital gains (not income tax) on the appreciation. That's a better deal than the 401(k) for them.

Not to mention, people in "zero" tax brackets are generally eligible for several different refundable tax credits, on top of not paying tax in the first place.

https://www.irs.gov/credits-deductions/individuals/refundable-tax-credits#:~:text=A%20refundable%20tax%20credit%20is,only%20until%20it%20reaches%20%240.

Meant to add -- the zero % taxpayer could do even better by putting their savings in a Roth and paying no tax at all when they withdraw in retirement.

[Anonymous]

Anonymous wrote:Has no one of this thread read secure 2.0? It expands access to 401ks, including requirements to make them more widespread for MC or working class folks. Yes, DB pensions are better but the accounting rule changes for a few decades ago plus 2001 and 2008 stock market changes basically put a fork in that. Unless you have a union with the power to insist on it, DBs are basically impossible.

Secure 2.0 has some good benefits, but it does not require businesses that do not offer 401ks to start offering 401ks. It is not the requirement equivalent of the ACA. That’s what folks are arguing about here.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Old people Genx and older 401k should be taxed based on their net worth not income

But they were already taxed on the money that is now net worth.

Money going INTO 401ks is not taxed ---

[Anonymous]

Anonymous wrote:Has no one of this thread read secure 2.0? It expands access to 401ks, including requirements to make them more widespread for MC or working class folks. Yes, DB pensions are better but the accounting rule changes for a few decades ago plus 2001 and 2008 stock market changes basically put a fork in that. Unless you have a union with the power to insist on it, DBs are basically impossible.

Kudos for mentioning the accounting changes for pensions as what sounded their death knell.

[Anonymous]

Anonymous[b wrote:]Seems a growing movement. So many people don’t have one and the people who do a huge tax giveaway to rich.

Look at all the New Yorkers retired to Florida who avoided SALT taxes for 40 years on 401k contributions now in Florida.

If we could tax those trillions would solve a lot of problems

[/b]


I gather you are a communist or at a minimum a socialist? what a bizarre post

[Anonymous]

Anonymous wrote:44 percent of employees have no access to a 401k.

And IRAs have lower contribution limits and no
match.

100% of the 44% of employees that have no access to a 401k still have access to an alternative job and employer that does offer a 401k. We’re not talking indentured servants here. Everyone has a choice.

Furthermore, for those that do have immediate access to a 401k, maximum employee contributions tend to be fixed, regardless of income. Thus, the plans inherently favor the poor, LMC, and MC. These are the lucky ones able to save the recommended 20% towards retirement in a tax-sheltered account. The much less fortunate individual with an income of $325K, for instance, can barely save 7% pre-tax. If anything needs to be fixed, it is this. Everyone – regardless of income – should be permitted to save up to 20% pre-tax in a 401k or similar plan.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Old people Genx and older 401k should be taxed based on their net worth not income

But they were already taxed on the money that is now net worth.

Money going INTO 401ks is not taxed ---

But all of it coming OUT is....what's your point?

[Anonymous]

Anonymous wrote:What would you recommend as an alternative to 401ks?

Exactly. I would rather have a pension but the companies replaced it with a louzy 401k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:401k should not transfer tax liability to a new state. It is deferred compensation and should be taxed in the state where it was earned, like CA does for RSU awards.

401k is for the MC/UMC, not the rich.

I feel this is fair, even though I have a place in a low tax zone!

and how would that work for someone like me? I’ve lived and earned money and contributed to my 401k in Virginia, Maryland, Illinois, Texas, California, Puerto Rico, and Alabama.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Old people Genx and older 401k should be taxed based on their net worth not income

But they were already taxed on the money that is now net worth.

Money going INTO 401ks is not taxed ---

But all of it coming OUT is....what's your point?

Their point is people avoid state income taxes during the distribution phase by moving to a zero income tax state.

Their proposal is to make everyone feudal serfs of the state so they can't move strategically in retirement.

[Anonymous]

401k was never intended to exist. It was an accidental side effect of a loophole in a tax law

Companies used it to switch to this and kill pensions.

My company does a generous 8 percent. But as a place with stores and call centers. The 50k a year people people get 4k match tops. Vast majority can’t afford to put in 8 percent to get that match so most are only getting 2-3k match

The 300k people do put in 8 and get a 24k match

at Chase high earners get a zero percent match on the 401k as Jaimie Dimon is like you make one million a year save for your own retirement .

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Old people Genx and older 401k should be taxed based on their net worth not income

But they were already taxed on the money that is now net worth.

Money going INTO 401ks is not taxed ---

But all of it coming OUT is....what's your point?

Their point is people avoid state income taxes during the distribution phase by moving to a zero income tax state.

Their proposal is to make everyone feudal serfs of the state so they can't move strategically in retirement.

Or make only you save on Fed taxes when you put in. MoCo, NYC, CA lose those tax dollars forever if people move. Plus even if people stay they are in a way lower tax bracket in retirement and it is delayed by up to 50 years to get payment

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Old people Genx and older 401k should be taxed based on their net worth not income

But they were already taxed on the money that is now net worth.

Money going INTO 401ks is not taxed ---

But all of it coming OUT is....what's your point?

Their point is people avoid state income taxes during the distribution phase by moving to a zero income tax state.

Their proposal is to make everyone feudal serfs of the state so they can't move strategically in retirement.

Or make only you save on Fed taxes when you put in. MoCo, NYC, CA lose those tax dollars forever if people move. Plus even if people stay they are in a way lower tax bracket in retirement and it is delayed by up to 50 years to get payment

Ahhhh Democrats. There's never a tax they didn't like or feel entitled to.

[Anonymous]

I find it weird that OP wants to phase out 401ks because high tax states may be missing out on even more taxes as people with 401ks flee the state when they retire to escape those taxes.

It's almost as though these states designed their taxes to encourage retirees to leave. The state can fix that if that was not the incentive they hoped to achieve.

[Anonymous]

Anonymous wrote:

Anonymous wrote:44 percent of employees have no access to a 401k.

And IRAs have lower contribution limits and no
match.

100% of the 44% of employees that have no access to a 401k still have access to an alternative job and employer that does offer a 401k. We’re not talking indentured servants here. Everyone has a choice.

Furthermore, for those that do have immediate access to a 401k, maximum employee contributions tend to be fixed, regardless of income. Thus, the plans inherently favor the poor, LMC, and MC. These are the lucky ones able to save the recommended 20% towards retirement in a tax-sheltered account. The much less fortunate individual with an income of $325K, for instance, can barely save 7% pre-tax. If anything needs to be fixed, it is this. Everyone – regardless of income – should be permitted to save up to 20% pre-tax in a 401k or similar plan.

Congrats on making the dumbest comment on this thread!

Where are these ~44% of jobs open, waiting for employees to take them?