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Old 03-23-2015, 05:19 PM   #21
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+1
How many that were in management were required to give the 401k talk every year. I got sick of that.
I looked forward to the annual presentations, or at least considered it important, and my HR Mgr and I tried many new ways to get people on board. After almost 20 years "selling" 401k's to employees every way we could dream up, sadly we never had as much success as we were hoping for.

When I retired early, some of our non-participants were shocked and asked how it was possible for me to retire at 57? As much as I wanted to answer, I didn't...
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Old 03-23-2015, 05:26 PM   #22
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When I retired early, some of our non-participants were shocked and asked how it was possible for me to retire at 57? As much as I wanted to answer, I didn't...
You have greater willpower than I do. I would have said something along the lines of "Remember all those 401k lectures you ignored? I didn't".
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Old 03-23-2015, 05:31 PM   #23
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..snip....
If you'd looked at my 401(k) balance just before I left my last employer, I was 61 years old and it was about $30K. Pitiful!
I'm assuming because the remainder was in a rollover somewhere? Plus taxable.

Which is exactly why some of the data being quoted is invalid. Sure ICI knows how much fund companies tell them is in 401k accounts(4.5 trillion). Vanguard can say what their customers have in their 401k. If you're across multiple providers the data presented is skewed. The value of an individuals savings is potentially incorrect, in that scenerio. It maybe close but it's 100% wrong for a set of data.
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Old 03-23-2015, 05:47 PM   #24
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A misleading title for this article. 26 U.S.C. Sec. 401k is just a section of the tax code providing that certain earned income can be saved tax deferred. It is neither a success nor a failure; it is just the law.

The failure is the wholesale abandonment of defined benefit pensions and shift to defined contribution plans for retirement security, with the concomitant shifting of risk to those who in many cases are ill suited to bear it. The failure is an economy that has given almost every bit of productivity gains over the past 30 years to capital rather than labor, such that employees who are not highly skilled have not seen sufficient income gains to allow them to save for retirement, on a tax-deferred basis or otherwise. And, yes, the failure is a society that values current consumption over virtually everything else.
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Old 03-23-2015, 05:52 PM   #25
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I'm assuming because the remainder was in a rollover somewhere? Plus taxable.

Right- I was there less than 2 years. Every single time I left an employer my 401(k) left soon after- rolled over into an IRA, of
course. I'd saved plenty in after-tax accounts as well.
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Old 03-23-2015, 06:30 PM   #26
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Exactly,
That's why I don't put much stock into these reports. They take real data and ignore reality to make whatever point they choose. Many people don't roll 401k over, or have multiple accounts as I do too. But the author is never asked to support their failed assumptions. Then others take them as fact, creating more confusion.
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Old 03-23-2015, 07:16 PM   #27
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The 401(k)- a failure?

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I looked forward to the annual presentations, or at least considered it important, and my HR Mgr and I tried many new ways to get people on board. After almost 20 years "selling" 401k's to employees every way we could dream up, sadly we never had as much success as we were hoping for.

When I retired early, some of our non-participants were shocked and asked how it was possible for me to retire at 57? As much as I wanted to answer, I didn't...

You have just reinforced my opinion that "financial education" for many people (heaven forbid high schoolers) is a waste of time. In theory it shouldn't but it is. Then people want to look back in their life and say they wish someone would have told them to do it, and I will bet you some of your workers will too despite it being laid out there.
Outside of avoiding public beatings as an incentive to save, people are going to do what they are going to do. Yes, I am generalizing as some do benefit, but not as many that could/should. I certainly have wasted money over the years and not done what I should have. But I did it anyways!


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Old 03-23-2015, 07:27 PM   #28
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You have just reinforced my opinion that "financial education" for many people (heaven forbid high schoolers) is a waste of time. In theory it shouldn't but it is. Then people want to look back in their life and say they wish someone would have told them to do it, and I will bet you some of your workers will too despite it being laid out there.
Outside of avoiding public beatings as an incentive to save, people are going to do what they are going to do. Yes, I am generalizing as some do benefit, but not as many that could/should. I certainly have wasted money over the years and not done what I should have. But I did it anyways!


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Of course if you follow the sermon on the mount you do not take heed of the future as you are told it will take care of itself. Further if you expect the world to end before you reach old age then why bother saving? There are so many apocalyptic predictions around today (and for at least the last 60 years and in fact 2000 years, recall that the first christians thought the world woudl end in their life time), that one could conclude that a fatalistic attitude at best is the way to go what will be will be.
With polls showing that 22 percent of americans think the world will end in their lifetime its not surprising at least that those who think so would follow the biblical motto of "eat drink and be merry"
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Old 03-23-2015, 08:19 PM   #29
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You need to make at least $120K to be affected by that rule. The last thing i'd be is "pissed" if I made $120K/yr.
It's definitely a problem that is good to have.

I shouldn't have any cause to complain as I was well compensated but I know I would be extremely mad if I had my 401k clawed back. I guess it's just bias on my part (tendency to overweight bad things instead of the good).
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Old 03-23-2015, 08:23 PM   #30
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It's definitely a problem that is good to have.

I shouldn't have any cause to complain as I was well compensated but I know I would be extremely mad if I had my 401k clawed back. I guess it's just bias on my part (tendency to overweight bad things instead of the good).
Yea, a good problem to have, and it definitely sucks eggs.
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Old 03-23-2015, 08:58 PM   #31
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A misleading title for this article. 26 U.S.C. Sec. 401k is just a section of the tax code providing that certain earned income can be saved tax deferred. It is neither a success nor a failure; it is just the law.

The failure is the wholesale abandonment of defined benefit pensions and shift to defined contribution plans for retirement security, with the concomitant shifting of risk to those who in many cases are ill suited to bear it. The failure is an economy that has given almost every bit of productivity gains over the past 30 years to capital rather than labor, such that employees who are not highly skilled have not seen sufficient income gains to allow them to save for retirement, on a tax-deferred basis or otherwise. And, yes, the failure is a society that values current consumption over virtually everything else.
Not sure of this line of thought. To my way of thinking, the defined benefit is a combination of future burden on the business and a private version of an annuity. Just like many state and local governments, businesses can and did underfund and overpromise their pensions. They then abandoned them by various means including bankruptcy. Those who got defined contributions got the defined contributions even if they died--the funds went to their heirs. Defined benefit, you die, you might get a death benefit but most likely it was like an annuity paying the other participants who out lived you. Doesn't mean one is always a better choice for everyone.
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Old 03-23-2015, 09:12 PM   #32
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Not sure of this line of thought. To my way of thinking, the defined benefit is a combination of future burden on the business and a private version of an annuity. Just like many state and local governments, businesses can and did underfund and overpromise their pensions. They then abandoned them by various means including bankruptcy. Those who got defined contributions got the defined contributions even if they died--the funds went to their heirs. Defined benefit, you die, you might get a death benefit but most likely it was like an annuity paying the other participants who out lived you. Doesn't mean one is always a better choice for everyone.
I'm sorry I was not clear. I was talking about the investment risk. Most individuals are crappy investors, without the ability or inclination to learn how to manage their defined contribution plans. They choose investments that are ill-suited to their needs, panic and sell when the market turns against them, jump on the bandwagon after the market has surged, and otherwise achieve substandard returns. Their risks are also concentrated - as in, if they lose money right before they personally need it, they are hosed. Traditional pensions, by contrast, are managed by professionals who are less likely to make these mistakes. And the risk of poor performance and timing of withdrawals is spread over the present and future pension recipients as a group, as well as over time.
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Old 03-23-2015, 09:14 PM   #33
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Someone starting out in the work force today and making $25K/yr every year until age 67 would only get $1145/mo or $13,740/yr in SS. That's a pretty big cut in pay for someone who already could barely get by let alone save for retirement. A lot of people in that income range work physically demanding jobs and probably can't work until age 67 so their benefit would be even lower.
Where are you getting your data? I recently read a study that for the lowest quintile of Income that SS replaced 70 something percent of gross income for a single and 60 something percent for a couple.
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Old 03-23-2015, 09:27 PM   #34
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But if you gross $25k, presumably you live on $22k or less after taxes and other deductions are taken out and SS will cover a lot of that and you don't need to max out a 401k to make up the gap.
And if you make up to $30K per year (MFJ, $18K if filing single), Uncle Sam will give you a 50% match on your IRA or 401K (via the Savers Credit). The credit is up to $1000. Matching continues, at a reduced rate, up to an AGI of $60K (MFJ or $30K if filing single).

It doesn't sound like much, but just the government match amounts to 5% of the person's earned income. If our $25K earner stays at that pay level for 45 years (to age 65) and then retires, just the government matching contributions (at 5% real growth) will equal $170K (or almost 7 years worth of income). The $2K contributed each year by the worker would be worth another $340K. Altogether he'd have over half a million dollars (those are "then-year" dollars, worth what they were when he was 20). Withdrawing at 4% per year, plus his SS, he'd have considerably higher income in retirement than he ever had while working.

That's with no employer match at all. Done strictly with an IRA, if need be, at $166 per month. Even saving 1/2 that amount (equivalent of working an extra 2.7 hours per week at the federal min wage), plus SS, would be a pretty good retirement for a person accustomed to that income.
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Old 03-23-2015, 09:33 PM   #35
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Where are you getting your data? I recently read a study that for the lowest quintile of Income that SS replaced 70 something percent of gross income for a single and 60 something percent for a couple.
Making a few assumptions. Assume the career average is 2083/month. Then the Formula does 826*.9 or 743 a month, and 1257 *.32 or 402 for a total of about 1145 per month. (Based upon the 25k income)
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Old 03-23-2015, 10:04 PM   #36
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Where are you getting your data? I recently read a study that for the lowest quintile of Income that SS replaced 70 something percent of gross income for a single and 60 something percent for a couple.
I plugged it into a SS calculator. I can't find the exact site I used. I just Googled 'SS calculator' and used one of the ones that came up.
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Old 03-24-2015, 03:28 AM   #37
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A misleading title for this article. 26 U.S.C. Sec. 401k is just a section of the tax code providing that certain earned income can be saved tax deferred. It is neither a success nor a failure; it is just the law.

The failure is the wholesale abandonment of defined benefit pensions and shift to defined contribution plans for retirement security, with the concomitant shifting of risk to those who in many cases are ill suited to bear it. The failure is an economy that has given almost every bit of productivity gains over the past 30 years to capital rather than labor, such that employees who are not highly skilled have not seen sufficient income gains to allow them to save for retirement, on a tax-deferred basis or otherwise. And, yes, the failure is a society that values current consumption over virtually everything else.
Great post.
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Old 03-24-2015, 04:33 AM   #38
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The failure is the wholesale abandonment of defined benefit pensions and shift to defined contribution plans for retirement security, with the concomitant shifting of risk to those who in many cases are ill suited to bear it. The failure is an economy that has given almost every bit of productivity gains over the past 30 years to capital rather than labor, such that employees who are not highly skilled have not seen sufficient income gains to allow them to save for retirement, on a tax-deferred basis or otherwise. And, yes, the failure is a society that values current consumption over virtually everything else.
That's it in a nutshell.
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Old 03-24-2015, 05:11 AM   #39
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The failure is the wholesale abandonment of defined benefit pensions and shift to defined contribution plans for retirement security, with the concomitant shifting of risk to those who in many cases are ill suited to bear it. The failure is an economy that has given almost every bit of productivity gains over the past 30 years to capital rather than labor, such that employees who are not highly skilled have not seen sufficient income gains to allow them to save for retirement, on a tax-deferred basis or otherwise. And, yes, the failure is a society that values current consumption over virtually everything else.
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Great post.
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That's it in a nutshell.
But what drove these "failures?" Ultimately consumers?
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Old 03-24-2015, 05:36 AM   #40
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Seems to me that several weeks ago, right here on this forum there was a long discussion about DC fretting about all the trillions of dollars in 401k/IRAs avoiding taxes and calls for caps, means testing etc.

A few weeks later, the same program is a failure with an average of only $18K in holdings? Now it is no longer a program but has become an 'experiment' (per the article title) that failed?
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