Should 401ks be phased out?

[Anonymous]

Anonymous wrote: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.

Obviously we need higher national (or interstate compact) tax and lower state tax to prevent a race to the bottom, but individual states can't force that.

[Anonymous]

Anonymous wrote:I'd be happy to phase them out in favor of old school pensions, but that seems unlikely.

You just discovered Social Security.

[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.

It’s unconstitutional. States cannot impose their income taxes on you once you leave. Maybe CA should stop sucking and reduce their taxes if they wanted to keep seniors.

You better file an amicus curiae brief, because SCOTUS is not aware of this astonishing fact.

State taxation of retirement distributions is merely a recent Federal law (1995). And it can easily be worked around by taxing it at contribution time, instead of payout time.

https://www.wipfli.com/insights/articles/tax-state-income-tax-implications-with-deferred-compensation

[Anonymous]

Tax policy is not your strong suit.

[Anonymous]

Anonymous wrote:

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.

How would pensions work when you switch jobs every 2-5 years? It's no longer pre 1980, people do not stay with the same company for 30+ years.

That is exactly why the 401k and Roth were created

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

Obviously we need higher national (or interstate compact) tax and lower state tax to prevent a race to the bottom, but individual states can't force that.

States can set taxes at whatever they like.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

Obviously we need higher national (or interstate compact) tax and lower state tax to prevent a race to the bottom, but individual states can't force that.

States can set taxes at whatever they like.

As long as there are states without taxes, the rich will just move to those for at least 6 months/year to avoid the state taxes. Not hard to do

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

Obviously we need higher national (or interstate compact) tax and lower state tax to prevent a race to the bottom, but individual states can't force that.

States can set taxes at whatever they like.

As long as there are states without taxes, the rich will just move to those for at least 6 months/year to avoid the state taxes. Not hard to do

great! sounds like good planning.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

Obviously we need higher national (or interstate compact) tax and lower state tax to prevent a race to the bottom, but individual states can't force that.

States can set taxes at whatever they like.

As long as there are states without taxes, the rich will just move to those for at least 6 months/year to avoid the state taxes. Not hard to do

It's amazing that many states refuse to understand this. Personally, I stomach DC income taxes but am seriously thinking of leaving over the estate tax, which amounts to 0.6% of total DC tax revenue. Why drive higher income residents out over a tax that in aggregate collects so little?

[Anonymous]

Anonymous wrote:

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?

his first comment wasn't the best but his comments on increasing contributions are spot on. Allow people to contribute more into 401ks if they want. The IRS will reap the rewards in 15 years when RMDs are through the roof.

[Anonymous]

Anonymous wrote:

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.

It’s unconstitutional. States cannot impose their income taxes on you once you leave. Maybe CA should stop sucking and reduce their taxes if they wanted to keep seniors.

You better file an amicus curiae brief, because SCOTUS is not aware of this astonishing fact.

State taxation of retirement distributions is merely a recent Federal law (1995). And it can easily be worked around by taxing it at contribution time, instead of payout time.

https://www.wipfli.com/insights/articles/tax-state-income-tax-implications-with-deferred-compensation

Good luck trying to make this argument. CA wants to try to keep taxing you after you leave the state. It will never be able to happen.

[Anonymous]

I will use my firm as an example.

We do 401k with a 6 percent match. We also for VP and up have a 457 (b)

Someone who is a single VP over 50 making 300k a year can put in 30k into 401k with a 18k match and 30k in 457 (b) including match

So they can put in 78k a year.

Now a single person over 50 in operations might make 50k a year, she can only afford to do 6 percent and gets 6 percent match so she is putting in 6k a year.

78k a year even with zero percent gains between 50 and 67 is $936,000 and 6k a year between 50-67 is $72,000.

[Anonymous]

Anonymous wrote:

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?

Here’s just one employer with ten of thousands of available jobs: https://www.usajobs.gov/

There are thousands of other employers, each with a multitude of positions. This is to say nothing of the unlimited number of opportunities available to those interested in starting their small business. I suppose it was dumb of me to underestimate the sheer laziness and lack of resourcefulness innate to individuals such as yourself. Thanks for the reminder!

[Anonymous]

Anonymous wrote:I will use my firm as an example.

We do 401k with a 6 percent match. We also for VP and up have a 457 (b)

Someone who is a single VP over 50 making 300k a year can put in 30k into 401k with a 18k match and 30k in 457 (b) including match

So they can put in 78k a year.

Now a single person over 50 in operations might make 50k a year, she can only afford to do 6 percent and gets 6 percent match so she is putting in 6k a year.

78k a year even with zero percent gains between 50 and 67 is $936,000 and 6k a year between 50-67 is $72,000.


great! life isn't fair.

[Anonymous]

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?

You would receive the same federal tax break whether a Florida resident or New York resident.