Interesting beginning to 401K's back in 1982.
The inventor of the 401(k) says he created a ‘monster’
The inventor of the 401(k) says he created a ‘monster’
Little known fact that was mentioned in the newspaper excerpt is that 401k contributions bypassed soc sec taxation by virtue of the salary reduction.
Uhh -- I think somebody got this part wrong. This is true for HSA contributions but not 401(k) contributions -- unless you are talking about the employer match.
-gauss
I am not sure how it worked historically but in the past few decades, when I have been paying attention, 401k deferrals were subject to FICA withholding.
Are we saying the same thing here?
One major benefit of 401k is that any remaining funds can be inherited by the next generation, while with db plans, the benefit ends with the person or their spouse. Am I missing something here?
If this is indeed the case, then you could argue that db plans have actually worked against multi-generational upward mobility, since any plan benefits cease with the generation that earned them.
If I am misreading this, please comment.
That's not the purpose of a DB plan. The purpose of a DB plan is to work with personal savings and SS to provide a comfortable retirement for a career employee, not his/her progeny.
If you have money left in a DC plan when you die then you either died before you were expected to or didn't spend enough.
Also, lump sum distributions (from either DC or DB plans) are positively correlated with poverty among the aged. Annuity payments from DB plans prevent poverty.
401K plans work great to supplement retirement income from SS and DB pensions, they were never meant to replace DB plans.
401K plans work great to supplement retirement income from SS and DB pensions, they were never meant to replace DB plans.
Then recently, they started chewing away at the 401k plan. They "match", but don't deposit it in the account until December of the year. If you quit or are laid off, you lose the yearly accumulated match.
Some of this is just downright wrong.
I think I worked for 2 companies early in my career that had pension plans. I never got a pension though, you had to be there for 20 years to get a pension. One job lasted 4.5 years and the other a whole 6 months.
The other interesting thing is neither of those Companies lasted 20 years after I left. Poof, gone are the pensions.
I'll take a 401K with profit sharing and 5 year vesting any day over a "smoke & mirror" pension.
But they have for so many Americans.
I worked in insurance and Chubb (although I never worked there) started this years ago. I'd thought of Chubb as a class act, but not after that. What impressed me with the employer that gave everyone not in the DB plan 6% (in addition to the match) was that when I left for another job in September, I got a pro-ration (so about 75%) of 6% of my salary added to my 401(k).
I think I worked for 2 companies early in my career that had pension plans. I never got a pension though, you had to be there for 20 years to get a pension. One job lasted 4.5 years and the other a whole 6 months.
The other interesting thing is neither of those Companies lasted 20 years after I left. Poof, gone are the pensions.
I'll take a 401K with profit sharing and 5 year vesting any day over a "smoke & mirror" pension.
This seems to be one of those areas that is heavily dependent upon the field in which you work. DW and I both have been solely with professional employers, predominantly small businesses. 401k has been fantastic for us, and it is unlikely that those employers would have been providing a DB plan in any event. (possible exception being my Big Law employer for 8-9 years right out of school)
Will grant that if you are with a solid Mega, or with Fed. or other viable Gov., it may be a different story. So too, several of my age-cohort relatives are benefited by relatively sound construction union DBs.