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12-24-2022, 11:14 AM
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#41
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2014
Posts: 7,372
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I agree with many of these points.
Opt-in makes sense. They can always opt back out. My main concern is that people who don't plan well will raid their 401(k)s and pay the 10% penalty- which they wouldn't have had to do with after-tax savings. For everyone who's motivated to keep money in the 401(k) due to tax consequences, there will be someone who discovers those consequences the following April 14. Others will find out that if they don't pay back their 401(k) loans within 60 days when leaving a company, it's also considered a withdrawal. Apparently some companies let you keep the loans there; others don't.
Yes, there are crappy plans. I was with a sub of Giant Enterprise from 2002 to 2006 and the 401(k) was awful. Most of the funds offered were proprietary funds from another subsidiary and the info available was pitiful. You could get on-line and see what they were worth today. Period. Oh, yeah- and there was company stock, too. I had tears of happiness in my eyes when we were sold and I saw the options offered by the acquiring company.
I am totally against beefing up SS to provide higher benefits. The government will always take more of your money in exchange for a promise to provide something in the future- except they can cut it back, eliminate it, tax it, etc. In the case of SS they'll also make sure those beefed-up benefits go to current recipients (even though it's not funded) or a certain very large lobbying organization will whine until they do.
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12-24-2022, 12:58 PM
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#42
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 2,872
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Quote:
Originally Posted by Chuckanut
I would add a forth reason many people don't signup - It's too confusing.
Most young people don't realize that it's the number of doublings that produces the big returns when a person hits retirement age. Start early enough and if you can add just one doubling the results are staggering. I sometimes show them a spread sheet that show how much more one can earn by starting an invest program at 20 instead of 30 years old. Sneek in one more doubling and it makes a huge difference.
Invest $2000 in an IRA, assume it doubles every 10 years.
End of:
1st decade - $4000
2nd decade - $8000
3rd decade - $16,000
4th decade - $32000
It's an eye opener to many young people I talk to.
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DS thinks this way and he's in his early twenties. Lucky guy.
I had a later start to saving and agree that having an auto opt-in is a good idea.
__________________
Eat, Drink and Be Merry.
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12-24-2022, 03:42 PM
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#43
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Posts: 7,436
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Related to 401k accounts and speaking of bad 401k investment choices, apparently more plans are incorporating fund of funds which include private equity funds.
Quote:
Private equity firms tailoring their products to casual workplace investors are winning repeated legal and regulatory battles in spite of critics who warn that unbridled funds threaten to undermine workers’ 401(k)s.
Intel Corp.‘s retirement plan committee defeated a class lawsuit this month that had been brought by employees challenging a suite of custom target-date funds invested in private companies. The U.S. Labor Department, meanwhile, mostly agreed in December to the terms laid out in Trump-era subregulatory guidance granting self-directed retirement plans permission to trade in off-market securities.
Investing in private companies outside traditional regulatory controls could make or break self-directed retirement portfolios, either leveling the playing field with wealthy investors or bogging down small-time savers with unmitigated risks. Until recently, those risks had outweighed the potential for big returns, but now companies say the pendulum is swinging in their favor.
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https://news.bloomberglaw.com/in-hou...-for-your-401k
Besides being more risky and outside of regulatory oversight, these PE funds carry higher expenses.
Casual investors would be one way of putting workers who for the first time have to make 401k decisions.
One would hope these new 401k account holders aren't auto-enrolled into these kinds of investments.
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12-24-2022, 03:51 PM
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#44
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,087
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I'm glad they will have the auto enroll.
I worked at many companies and I saw plenty of employees who didn't enroll due to many reasons and miss out on even the free company matching. Reasons like: didn't know, apathy, not understanding, mis-information, etc.
As for lousy funds, I was at some companies like that with high expense funds, but still with the company match it and the chance to save a lot, it was better than not enrolling, knowing I could roll it to an IRA when I left.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
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12-24-2022, 04:10 PM
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#45
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Recycles dryer sheets
Join Date: Oct 2018
Posts: 193
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Quote:
Originally Posted by tenant13
That’s an excellent point. And like you I’m very glad to be in control of my financial future.
I’m certainly torn between my support for financial independence and my mistrust of the retirement “industry”. I wish there was a way of empowering as many people as possible but I don’t see this bill as a solution.
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You may be right, but many people mistrust the government more than the financial industry. It may be misplaced, but who can blame them, with almost daily forecasts of ssc insolvency? Increasing ssc withholdings in return for an assurance of higher payouts later will be difficult to sell.
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12-24-2022, 04:32 PM
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#46
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,349
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Quote:
Originally Posted by Sunset
I'm glad they will have the auto enroll.
I worked at many companies and I saw plenty of employees who didn't enroll due to many reasons and miss out on even the free company matching. Reasons like: didn't know, apathy, not understanding, mis-information, etc.
As for lousy funds, I was at some companies like that with high expense funds, but still with the company match it and the chance to save a lot, it was better than not enrolling, knowing I could roll it to an IRA when I left.
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No question in my mind that this is in general a good thing. Of course there will be problems. I saw people take big loans out on their 401(k) accounts and when they were suddenly laid off they were in a world of hurt to pay those back immediately.
But looking at the big picture, this should nudge a lot of folks into better financial planning and that is more likely to be a good thing than a bad thing.
__________________
I thought growing old would take longer.
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12-24-2022, 09:18 PM
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#47
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Thinks s/he gets paid by the post
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 3,014
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If I were King, I would not allow loans or early withdrawals n 401Ks or IRAs. Period. It is supposed to be for retirement. I mean, you can't take a loan out on, or withdraw from your future SS benefits. this would remove the temptation to make a foolish mistake. Yes, some people do need the money early. Those same people will need the money when they retire too.
Let those who are savvy and want to invest their retirement somewhere else, do so by opting out.
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12-26-2022, 09:44 AM
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#48
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Full time employment: Posting here.
Join Date: Sep 2014
Posts: 645
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I worked at a private trust company. I was in charge of the accounting for the 401k plan (15 employees with a total value of about $2 million). The average balance was good ($133k), but there were 2 accounts with over $500k, and several more with over $150k. That left about 10 accounts with an average balance of about $20k. The company matched 5% of pay (you put in 1% and the company puts in 5%). I ran meetings semi-annually about the funds and how the employees would benefit in the long term with putting in just 1%. I pushed for people to put in 7-10%, but was seen as being pushy. The management and 2 others maxed out the annual contributions ($10k in those days). The staff (who were all college finance graduates who should know better) and the admin team put in the minimum (except for 1 who refused to put anything in since that means she would get a pay cut!!). After 5 years, I was in the top account size, even though there were several more who had been employed for 5-10 years before me.
No matter how much we tried to educate the staff (who all were in the financial industry!!), there were too many who felt that $$ in hand to buy another Starbucks coffee was worth more than anything in the 401K.
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12-26-2022, 12:20 PM
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#49
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2010
Posts: 5,911
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One thing that shocked me as a senior manager was the number of employees who leave employer money on the table.
My employer had a matching pension scheme. Employer would match the ee's contribution up to to certain percentage. I was amazed at how many people opted out. Also, of those who opted in, very very few actually went into the plan to change their investment choices from one year to the next.
I gave up on getting employees to attend company sponsored retirement seminars. They were typically attended by those who had their finances under control and were working their retirement savings plans. The others did not want to know.
We had a great employee stock plan. Employees were guaranteed a 15 percent return every year. It was often more than that. I used it to make a lump sum payment on our mortage every year.
Is it any wonder why some people find themselves at 55-60 without the necessary retirement funds? One look at the consumer credit stats for people in that age group tells the story.
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12-27-2022, 12:41 AM
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#50
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Recycles dryer sheets
Join Date: Feb 2014
Posts: 330
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I am all for it. I can't believe the number of people who don't use a 401k and barely save when given the option. People love having their paycheck and seeing more go away doesn't work.
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12-30-2022, 04:47 PM
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#51
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Thinks s/he gets paid by the post
Join Date: Jan 2016
Posts: 1,241
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Quote:
Originally Posted by tenant13
https://www.nbcnews.com/business/con...bill-rcna62751
Why do I have a sneaky suspicion that this has been pushed by the financial advisory industry coupled with the drive to privatize Social Security? Given the constant drumbeat concerning the impending cuts in SS benefits and numerous attempts to take SS private, this seems like the first step in that direction. It reminds me of the overhaul of pensions that turned into 401k's. Most of my friends have no clue what's going on with(in) those, even if the have them.
If the goal is to help workers have more retirement income, why not reform Social Security in such a way that would insure just that. With mandatory contributions to 401k, the big winners will be funds managers and barely regulated advisors. What do you think?
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This is more government overreach. Why should “daddy” tell people what to do with their money? Big daddy already takes plenty of their money through taxes. Maybe an employee wants to invest in a Roth or Traditional IRA instead. Maybe they want to invest in a brokerage account. Or maybe has other priorities for their money. It’s the employees money and what they do with it is his/ hers personal choice and no one else’s business.
401ks should be opt in only.
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12-30-2022, 05:08 PM
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#52
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: Reading, MA
Posts: 1,795
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I was automatically enrolled in my employer's 403(b) retirement plan back in 1973!
Mandatory contribution from my salary was 5% with no opt-out option. Additionally, my employer contributed 10% of my salary to my retirement plan. This went on for almost 41 years, so a decent accumulation.
Additionally, I had a totally optional Supplemental 403(b) plan to which I eventually contributed the max of around $23,000 per year back before I retired in 2013. That max amount increases most years and is higher now.
This worked out well in my case...
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12-31-2022, 05:01 AM
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#53
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Recycles dryer sheets
Join Date: Jan 2022
Posts: 253
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Quote:
Originally Posted by meleana
This is more government overreach. Why should “daddy” tell people what to do with their money? Big daddy already takes plenty of their money through taxes. Maybe an employee wants to invest in a Roth or Traditional IRA instead. Maybe they want to invest in a brokerage account. Or maybe has other priorities for their money. It’s the employees money and what they do with it is his/ hers personal choice and no one else’s business.
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It's simple - the employee opts-out of the 401k and invests however they like. They aren't being forced to do anything.
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12-31-2022, 06:35 AM
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#54
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Thinks s/he gets paid by the post
Join Date: Jan 2011
Location: Fair Lawn
Posts: 2,960
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Keeping in mind the audience here, I think I'm an outlier with this suggestion: make the mandatory contribution amount 1%. My thought is that most people not voluntarily saving, now, will feel that 3% is too high. 1% has a better chance of staying inside a 401K.
MAYBE mandate gradual increases to that percentage with each year, perhaps 1/2%, until it reaches 3%. If the goal is to encourage retirement savings, and we have the known statistics showing how many people withdraw their contributions each year, this might improve the odds of success.
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12-31-2022, 06:41 AM
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#55
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2013
Location: Texas
Posts: 10,930
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Quote:
Originally Posted by meleana
This is more government overreach.
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Yes BUT, seems okay to me as long as they can opt' out and they don't make it mandatory at some point further down the road.
I know at my 2nd megacorp, the CEO would often talk to groups of new employees and make the comment/suggestion to sign up for the companies 401k, put in the max (for full matching) and you'd retire a millionaire. I always felt that was a pretty bold general statement.
In my case, I always felt it was (let's say silly) not to get in my companies 401k plan. It was like saying no to a 7% salary increase.
__________________
20's "something" mind, trapped in a 70's "something" body
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12-31-2022, 11:39 AM
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#56
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Moderator
Join Date: Nov 2015
Posts: 13,915
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Mod reminder: Like all threads here, this is not the place to air political grievances.
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01-01-2023, 08:09 AM
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#57
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Thinks s/he gets paid by the post
Join Date: Oct 2011
Location: Philadelphia
Posts: 1,404
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I'm generally in favor of this but perhaps it shouldn't started until you are 21 or even 25.
I've been helping a college student get her finances together. I mentioned in another thread how upset I was about her level of college debt.
One thing I bumped into was that the manager at her megastore had helpfully told her she should enroll in the 401k to get the max match. Nice person trying to do the right thing.
But this young lady needs cash now.
While she was being a little profligate in her spending (as 19 year olds do) the real issue was that she was simply up against it in terms of paying her own way in life while trying to get through school. As a result she had money on credit cards and still had an outstanding car loan @ 6.75% (whoever got her into that needs smack in the head).
The 401k contribution was the same as her car loan.
We shut off that contribution to get her some cash flow.
Back to opt-out, most people don't really understand this stuff and won't take any action. On balance, that's probably a good thing but maybe not before people are 21 or some other trigger point.
(BTW, kudos to the student. With a bit of guidance on how money works, cash flow, balance sheet and budgeting, she's gone straight after the issue and really gotten her spending into a better shape. She's incredibly diligent, just needed some help.)
__________________
Luck is when Preparation meets Opportunity.
FIRE'd 1/1/24
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01-02-2023, 04:49 AM
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#58
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Thinks s/he gets paid by the post
Join Date: Jul 2020
Posts: 1,503
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Quote:
Originally Posted by CRLLS
If I were King, I would not allow loans or early withdrawals n 401Ks or IRAs. Period. . Those same people will need the money when they retire too.
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I'll disagree. We got into a situation that almost cost us losing our home. Its was either bankruptcy or borrow. 401 loan was 9% and I kept the interest Vs twice the interest going to the bank. Plus the market took a big dip a few months later so bought back cheaper... What we now have extra padding and not "needed"
__________________
Went from EMS to PDN
Earn Money Sleeping/ Paid Doing Nothing
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01-02-2023, 04:27 PM
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#59
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,361
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Quote:
Originally Posted by meleana
This is more government overreach. Why should “daddy” tell people what to do with their money? Big daddy already takes plenty of their money through taxes. Maybe an employee wants to invest in a Roth or Traditional IRA instead. Maybe they want to invest in a brokerage account. Or maybe has other priorities for their money. It’s the employees money and what they do with it is his/ hers personal choice and no one else’s business.
401ks should be opt in only.
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If it were not for the fact that the general population has proven that they are, more often than not, totally incapable of saving for retirement, you would have some good points. Proof positive is the totally pathetic amount of retirement savings for most people currently in their 50s and 60s.
Big daddy isn't taking anything, it's still the employees money. If they prefer a tIRA or a Roth or a taxable brokerage account then the can simply opt-out and contribute to a tIRA or Roth or taxable account. Easy peasy.
If we don't let "daddy" help steer people who are unwilling to save for retirement to save, then the rest of us who act responsibly will end up having to help pay for them.
It is their money, and if they don't want anything withheld they can just opt-out.
Where you state it should be opt-in only I think you are just plain wrong.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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01-03-2023, 04:45 PM
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#60
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Full time employment: Posting here.
Join Date: Aug 2017
Location: claremont
Posts: 601
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The biggest thing I fear is conflating the student loan mess with retirement. That aspect looks like another effort to prop up high priced education even higher.
Participating in 401k's is a big reason I have wealth and independence. Spreading the love by making the default yes gets a big thumbs up. With in-service rollovers you can take charge of your money and avoid lousy internal choices. I am sure the Robinhood crowd could quickly roll and manage their retirement money.
The last thing I would advocate for is more government retirement via FICA. Pitting different generations of citizens against each other for political profit is not in anyones financial interest... except perhaps the Man!
If they can mandate 401k participation... would they please make FICA voluntary?
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