401(k)s Will Be Gone Within a Decade

[odanny]

I get what you are saying, but I struggle with the idea it is the Govt's job to keep us safe from ourselves.

You can always apply for a hardship loan (you have to pay it back) if you meet certain conditions, they also allow penalty free withdrawal for home purchases and medical bills, all I can say as a newly retired person is I thank DOG that I never could have withdrawn money from my 401k like a checking account,

 

[Harpy Eagle]

You can always apply for a hardship loan (you have to pay it back) if you meet certain conditions, they also allow penalty free withdrawal for home purchases and medical bills, all I can say as a newly retired person is I thank DOG that I never could have withdrawn money from my 401k like a checking account,

I actually took a hardship loan very early in my time of having a 401k. It was close to 10 years ago now and has been paid back more years ago than I can remember. Much in our lives have changed since then and we have not ever even had to think about such a thing again. The only thing I have done is in Jan pulled all but 5 grand out of my employer 401k and moved to an IRA with my investment guy. A bit higher maintenance cost, but now have 1000 times more choices of what to invest in.

 

[FranklinRoosevelt_FTW]

401(k)s Will Be Gone Within a Decade

The intellectual case for getting rid of tax-advantaged retirement plans is strong, and the political case is catching up.

www.wealthmanagement.com

Had this link in a retirement related email I get weekly. I found it pretty interesting ..

If you are among the 56% of US workers with a retirement plan, I have some bad news for you: Your 401(k) will be gone in 10 years, tops. Not the money, thank goodness — Americans have trillions of dollars in these accounts, and there is an entire industry built around them — but the plans themselves.

I have been seeing more and more about this lately...and it all comes down to the Govt and money....


There has been a brewing intellectual movement to get rid of the 401(k) for several years, with scholars on both the right and left questioning its value. And as the federal government gets increasingly desperate for new sources of revenue, the tax treatment of 401(k)s is a likely target. There are good policy reasons to end it, but the question remains: Will Americans still save for retirement?

The 401(k) is not tax-free but what is known as tax-advantaged. Contributions made while working are not taxed, but participants pay taxes when they withdraw the money during retirement. Whether there is a big tax savings depends on the tax rate in retirement — which is usually lower because retirees tend to have lower earnings. Savers also avoid capital gains taxes on returns.

All of this cost the government an estimated $185 billion in 2019, or 0.9% of GDP. That’s not nothing. And in theory it’s justifiable because it creates a powerful incentive to save for retirement. More retirement savings have a triple benefit: for the economy overall, since they fuel growth; for the government, since retirees with income are less likely to be a burden on the state; and, of course, for workers who might not save enough today and regret it later.

Then again, maybe not. The first rumblings that the benefits of the tax breaks may be overstated came in a 2014 study of Danish savers. Without tax-advantaged accounts, it found, people just put their money in another kind of account. People did save more in retirement accounts, but that’s mostly because of automatic paycheck deduction. Subsequent research in other countries found similar results. Not only did the tax incentive fail to encourage more saving; the biggest beneficiaries tended to be the wealthy.
One alternative...

Enter the employer-sponsored liquid account. Like a retirement account, it is funded by payroll deductions, but unlike a 401(k), it allows employees to withdraw money without a penalty when needed. As these accounts grow in popularity, they may displace the 401(k). More liquid accounts, similar to a Roth IRA, have been become popular in Canada, and Canadians are saving more in them than in the tax-advantaged retirement accounts.

Since Biden took office, the middle class has been wrecked. The average cost of a home doubling, interest rates on loans more than tripling.

Lots of Americans these days are working Walmart type jobs. It’s hard to see a comeback of the days of somebody right out of high school Going to a steel plant and getting the types of benefits you’re talking about. Like a 401(k) or double time overtime pay.

This has honestly been going on for a few decades. Been a slow death for the middle-class in America. To Donald Trump‘s credit at least when he was in office wS much lower compared to today.

 

[San Souci]

The cancer will always go to the nearest blood supply until it kills the host entirely.

It is only a matter of time.

True. Big Gov't is the root of all Evil.

 

[skews13]

The cancer will always go to the nearest blood supply until it kills the host entirely.

It is only a matter of time.

That ship already sailed For those not old enough, or just don't know. 401Ks were never intended for the average worker. They were designed as perks and bonuses for executives in companies.

Until the 1980's, the average worker had pensions in the companies they worked for. Corporations were able to avoid the top marginal tax rates at that time, by putting their profits back into the company to pay workers pensions.

That all changed with the ronny ray-gun revolution, where this all went into the tash, and anti trust laws were repealed, allowing companies to buy back their own stocks, which was illegal up until that point. And were given huge tax cuts on top of that, while allowing mergers, and the offshoring of jobs to bust labor unions.

The steelmills and auto plants shut down, those jobs are moved to Canada, Mexico, and China. The Japanese car market is open to imports, and the American Rust Belt is born. And those stupid mother fuckers in Ohio and western Pennsylvania still to this day haven't figured that out yet.

The mom and pop store on Main St. era is gone. The age of Walmart is born. No more company pensions, wages for workers fall through the floor, and are offered 401Ks as a way to make up for lost wages that helped them now, by hopefully being able to save enough to not retire in poverty, the family structure is destroyed, because now both parents have to work to make ends meet.

And AM talkradio is completely revamped to convince the conservative losers that the way to get ahead is kissing the bosses ass, and snitching on their coworkers.

And nothing has changed since then, because the bosses can count on the fact that conservatives are natural born ass kissers and snitches.

 

[my2¢]

And as the federal government gets increasingly desperate for new sources of revenue, the tax treatment of 401(k)s is a likely target.

I haven't much faith in the Wealth Management article. Seems to me if there was any urge to get rid of 401k's then we'd witness it through acceleration of the Required Minimum Distribution (RMD). These withdraws are taxed as income.

If there was any urge to get to that money the government could lower the RMD age. Perhaps require these withdraws to start the year the owner becomes eligible for full Social Security benefits. They also could shorten the number of years between the starting RMD age and when the account has to be depleted.

However, Congressional thought has been going in the exact opposite direction. The RMD started out at 70½, then upped to 72 back in 2019. It is now 73 for those of us born from 1951 to 1959 and is 75 years-old for those born in 1960 and later.

I don't see how that jives with the article's contention that both Left and Right are out to rid us of 401k accounts.

 

[Flopper]

401(k)s Will Be Gone Within a Decade

The intellectual case for getting rid of tax-advantaged retirement plans is strong, and the political case is catching up.

www.wealthmanagement.com

Had this link in a retirement related email I get weekly. I found it pretty interesting ..

If you are among the 56% of US workers with a retirement plan, I have some bad news for you: Your 401(k) will be gone in 10 years, tops. Not the money, thank goodness — Americans have trillions of dollars in these accounts, and there is an entire industry built around them — but the plans themselves.

I have been seeing more and more about this lately...and it all comes down to the Govt and money....


There has been a brewing intellectual movement to get rid of the 401(k) for several years, with scholars on both the right and left questioning its value. And as the federal government gets increasingly desperate for new sources of revenue, the tax treatment of 401(k)s is a likely target. There are good policy reasons to end it, but the question remains: Will Americans still save for retirement?

The 401(k) is not tax-free but what is known as tax-advantaged. Contributions made while working are not taxed, but participants pay taxes when they withdraw the money during retirement. Whether there is a big tax savings depends on the tax rate in retirement — which is usually lower because retirees tend to have lower earnings. Savers also avoid capital gains taxes on returns.

All of this cost the government an estimated $185 billion in 2019, or 0.9% of GDP. That’s not nothing. And in theory it’s justifiable because it creates a powerful incentive to save for retirement. More retirement savings have a triple benefit: for the economy overall, since they fuel growth; for the government, since retirees with income are less likely to be a burden on the state; and, of course, for workers who might not save enough today and regret it later.

Then again, maybe not. The first rumblings that the benefits of the tax breaks may be overstated came in a 2014 study of Danish savers. Without tax-advantaged accounts, it found, people just put their money in another kind of account. People did save more in retirement accounts, but that’s mostly because of automatic paycheck deduction. Subsequent research in other countries found similar results. Not only did the tax incentive fail to encourage more saving; the biggest beneficiaries tended to be the wealthy.
One alternative...

Enter the employer-sponsored liquid account. Like a retirement account, it is funded by payroll deductions, but unlike a 401(k), it allows employees to withdraw money without a penalty when needed. As these accounts grow in popularity, they may displace the 401(k). More liquid accounts, similar to a Roth IRA, have been become popular in Canada, and Canadians are saving more in them than in the tax-advantaged retirement accounts.

The government is still pushing people to invest more money in their 401Ks and IRAs. The reason being Social Security will have to start paying less in the future. Everything goverment does is encourage people to save more for retirement. Removing the tax advantage in retirement programs is self defeating. It will just ensure the collapse of social security.

 

[Flopper]

I had this rollover 401K I invested years ago. I was recently reminded that half of it is an annuity.

Based on current average payouts, a 60-year-old male who purchases a $100,000 immediate annuity with a lifetime payout can expect to receive approximately $627 per month.

Kind of cool I'll be getting $600 bucks a month for life on that one thing. So even with just social security and that, even if Republican cut my social security 25%, will be $2100 a month. I can live on that now. Barely but I can.

Then I should have another $900K at least. Let's say I make an extra $27,000 on that a year at 3%. That's $50K to live on without touching the $900K.

I REALLY don't want to spend the money I save. I want to just live off the interest and social security.

BUT, I will spend $200K on a condo in Florida eventually. Fuck winters in Michigan. My family tells me I should get one now because now they are only $100K. But then I will have $6000 a year in bills for the next 10 years. Fuck that. I need to save that money not buy a condo.

I'm lucky. My brother has a hunting property up north, a condo in Florida and a place in Greece. So free room and board wherever I go. LOL

While $600 a month might sound good now but with no provision for inflation, in 20 years that $600 might just buy the family a good dinner.

 

[Dekster]

401K plans will be alive and kicking in 10 years. The powers that be like that it inflates stock prices every payday to force the appearance of "growth".

 

[MarathonMike]

I'm 53. at 59.5 I'm going to move my money into a 4% (god willing) government secured savings. Even 1%. But it won't go down. I just need to keep making 10% for the next 6 years. Maybe at age 60 I'll take some and put it on the stock market but the majority of it will be safe.

Best case scenario my dad leaves me $400K and my nephews are rich. Or they will be so I have no need to worry about how much money I leave to them. So I could have $1.5 MILLION. Let's say they cut my social security 25% so I make $1500 a month instead of $2000. I could spend $68,000 a year for 30 years. No way I'll live to be 90.

I think I'll be alright but I will be pissed too and I'll be even more upset when Republicans blame Democrats.

I am amazed at my friends over 60 who are still so highly exposed to the stock market. I didn't go all in to fixed income when I hit 60 but rather 30 percent stocks 70 percent fixed. Through stock appreciation the numbers are now more like 35/65.

 

[sealybobo]

I am amazed at my friends over 60 who are still so highly exposed to the stock market. I didn't go all in to fixed income when I hit 60 but rather 30 percent stocks 70 percent fixed. Through stock appreciation the numbers are now more like 35/65.

I'm 53 and nervous the markets going to crash before I turn 59.5. I think I'm going to go same as you. 30% risky. Fuck it. I think I'm also going to start investing in safer stuff like 4% but also tax free.

It seems a lot of people don't consider how much they're going to pay in taxes later. So it's best to put the most you can away in tax free investments.

Anyways, it'll be nice in 6 years to take all my money, finally be able to touch it without penalty, and maybe combine it all into one or two buckets. Like you said 30% stock market and 70% safe.

You know what? Fuck the stock market. My broker uses covid and russia as excuses but I think in all these years he's only gotten me 6.6%. Not worth the risk. Just give me a safe 4%.

OMG my brother and wife are retiring mid 50's with I believe $15 million. Probably not all in cash. Maybe net worth. They have 3 cool places. Up north MI, Florida and Greece. And healthcare is expensive for the next 10 years before they get social security. I think he'll go back and do consulting to make a few bucks. It's expensive to jet set around the world for a year I'm sure they'll take a big chunk out of that $15 million this year.

 

[Flopper]

I am amazed at my friends over 60 who are still so highly exposed to the stock market. I didn't go all in to fixed income when I hit 60 but rather 30 percent stocks 70 percent fixed. Through stock appreciation the numbers are now more like 35/65.

If you are over 60 and you will be solely dependent on your investments for your retirement income it is very advisable to follow the formula, Percent in Stocks = 100-your age. Also keeping your withdrawal not more than 4% is a good idea, particularly in early years of retirement. However, if your retirement income will come mostly from other sources and you are heathy and expect a relatively long life, then putting more into equities in well a balanced portfolio would make sense. However, I would not put more than 75% in equities.

I retired at 59 1/2 and have never needed my RMDs to live on so I have reinvested them. When I turned 80, I started spending my RMDs, giving money to family members and charities. Since I retired I have been 65% to 75% in stocks with the remainder in cash and tax free bonds. I use mutual funds to make sure I am well diversified and to free me from daily management of my portfolio.

No one size fits all. Unless I really knew how to manage investments and how to construct a good retirement portfolio, I would consult a professional. I would not go to the ones that are free as they will make their money by extracting fees or a percent of your portfolio yearly which can be quite expensive.

 

[MarathonMike]

If you are over 60 and you will be solely dependent on your investments for your retirement income it is very advisable to follow the formula, Percent in Stocks = 100-your age. Also keeping your withdrawal not more than 4% is a good idea, particularly in early years of retirement. However, if your retirement income will come mostly from other sources and you are heathy and expect a relatively long life, then putting more into equities in well a balanced portfolio would make sense. However, I would not put more than 75% in equities.

I retired at 59 1/2 and have never needed my RMDs to live on so I have reinvested them. When I turned 80, I started spending my RMDs, giving money to family members and charities. Since I retired I have been 65% to 75% in stocks with the remainder in cash and tax free bonds. I use mutual funds to make sure I am well diversified and to free me from daily management of my portfolio.

No one size fits all. Unless I really knew how to manage investments and how to construct a good retirement portfolio, I would consult a professional. I would not go to the ones that are free as they will make their money by extracting fees or a percent of your portfolio yearly which can be quite expensive.

I've never had a financial advisor in my life. I did all my own investments be they stocks, fixed income, real estate, exotic birds, you name it I did it. It all worked out and have more than we need.

 

[Flopper]

I'm 53 and nervous the markets going to crash before I turn 59.5. I think I'm going to go same as you. 30% risky. Fuck it. I think I'm also going to start investing in safer stuff like 4% but also tax free.

It seems a lot of people don't consider how much they're going to pay in taxes later. So it's best to put the most you can away in tax free investments.

Anyways, it'll be nice in 6 years to take all my money, finally be able to touch it without penalty, and maybe combine it all into one or two buckets. Like you said 30% stock market and 70% safe.

You know what? Fuck the stock market. My broker uses covid and russia as excuses but I think in all these years he's only gotten me 6.6%. Not worth the risk. Just give me a safe 4%.

OMG my brother and wife are retiring mid 50's with I believe $15 million. Probably not all in cash. Maybe net worth. They have 3 cool places. Up north MI, Florida and Greece. And healthcare is expensive for the next 10 years before they get social security. I think he'll go back and do consulting to make a few bucks. It's expensive to jet set around the world for a year I'm sure they'll take a big chunk out of that $15 million this year.

Don't know anything about your finances nor your retirement plans but here are few ideas that might help.

• Taking a distribution larger than your RMD (Required Minimum Distribution) each year out of your tax sheltered retirement plans is usually a bad idea unless you need the money. It might seem that it is better to take the money now out your tax shelter retirement plans and pay taxes rather leave it in to be taxed later. History has proven that wrong. When you leave money in your retirement plan, you are making money off the governments money; that is money that you would have paid in taxes if you withdrew it.
• I have invested in tax free municipal bonds for many years and still own a few tax free bond mutual funds. I have found that at a 24% tax bracket, buying tax frees really depends on the return of taxable bonds and tax free bonds. At a 27% bracket, tax frees probably make sense and at 35%, definitely tax frees.
• I would not be concerned about a market crash between now and retirement. If you are like most people, you will not be cashing in your retirement plan when you retire but rather taking yearly RMDs. We will always have bear markets followed by bull markets. As long you stay fully invested in your retirement plans, in the long run it will probably not make much difference when they come. It would be great if we could have a great bull market that started before we retire and lasted throughout our life but that is not likely happen.

 

[Flopper]

I've never had a financial advisor in my life. I did all my own investments be they stocks, fixed income, real estate, exotic birds, you name it I did it. It all worked out and have more than we need.

Good for You.
I'm sorry I meant a financial planned.
I've been investing in stocks since 1962 and bonds since 1980 and I have never needed an investment advisor.

I went to a free financial planner who just wanted me to put all my retirement in mutual funds he sold. A friend recommended someone else who charged a fee and had nothing to sell. It cost $600 for 3 visits over a year period. I learn at lot of things I had never thought about such as various types of trusts and wills, insurance, avoiding federal and state inheritance taxes, all kinds of documents such as medical power attorney, and most useful a complete inventory of everything I owned along with location, and instructions as to what should be done with it when I die, and there were a lot of tax tips I never thought about. It was well worth the $600.

 

[MarathonMike]

Good for You.
I'm sorry I meant a financial planned.
I've been investing in stocks since 1962 and bonds since 1980 and I have never needed an investment advisor.

I went to a free financial planner who just wanted me to put all my retirement in mutual funds he sold. A friend recommended someone else who charged a fee and had nothing to sell. It cost $600 for 3 visits over a year period. I learn at lot of things I had never thought about such as various types of trusts and wills, insurance, avoiding federal and state inheritance taxes, all kinds of documents such as medical power attorney, and most useful a complete inventory of everything I owned along with location, and instructions as to what should be done with it when I die, and there were a lot of tax tips I never thought about. It was well worth the $600.

Other than attending various seminars on investing strategies and more recently asset management and social security, no paid advisors of any kind. And yes we started organizing and consolidating our stocks, DRPs, bonds etc into our primary bank and documenting everything in a spreadsheet. It's taken months, mostly by my wife who is far more organized than I am.

 

[sealybobo]

Don't know anything about your finances nor your retirement plans but here are few ideas that might help.

• Taking a distribution larger than your RMD (Required Minimum Distribution) each year out of your tax sheltered retirement plans is usually a bad idea unless you need the money. It might seem that it is better to take the money now out your tax shelter retirement plans and pay taxes rather leave it in to be taxed later. History has proven that wrong. When you leave money in your retirement plan, you are making money off the governments money; that is money that you would have paid in taxes if you withdrew it.
• I have invested in tax free municipal bonds for many years and still own a few tax free bond mutual funds. I have found that at a 24% tax bracket, buying tax frees really depends on the return of taxable bonds and tax free bonds. At a 27% bracket, tax frees probably make sense and at 35%, definitely tax frees.
• I would not be concerned about a market crash between now and retirement. If you are like most people, you will not be cashing in your retirement plan when you retire but rather taking yearly RMDs. We will always have bear markets followed by bull markets. As long you stay fully invested in your retirement plans, in the long run it will probably not make much difference when they come. It would be great if we could have a great bull market that started before we retire and lasted throughout our life but that is not likely happen.

Covid started in 2020 then Russia invaded and my stocks took a long dump. Scared me. And how many years did it take to bounce back from the 2008 Great Recession? Years!

I just found out my condo dues are going up because our wall needs to be replaced. It's HUGE!!! Now I definitely don't want to pay for a wall on the border. I'm already paying for one here. LOL. Anyways, I think my dues are going to go up $150 a fucking month to pay for that wall.

So, I have a feeling, because I have an easy job, I'm just going to keep working till I'm 65. By then I'll be loaded, have social security and my ss will be more than if i retired at 62.

 

[Flopper]

Covid started in 2020 then Russia invaded and my stocks took a long dump. Scared me. And how many years did it take to bounce back from the 2008 Great Recession? Years!

I just found out my condo dues are going up because our wall needs to be replaced. It's HUGE!!! Now I definitely don't want to pay for a wall on the border. I'm already paying for one here. LOL. Anyways, I think my dues are going to go up $150 a fucking month to pay for that wall.

So, I have a feeling, because I have an easy job, I'm just going to keep working till I'm 65. By then I'll be loaded, have social security and my ss will be more than if i retired at 62.

I just wish my condo dues were $150. In Jan. my dues when to $560 plus a $1,000 assessment. The cost of home maintenance has really gone up since Covid, mostly due to a shortage of skilled labor. I'm looking at a 75 foot ditch in our driveway due to some new plumbing pipes. We've been waiting nearly two months to get someone to fix the concrete.

Over the last 20 years the S&P 500 has delivered an average yearly return of 7.7%, 9.8% with dividends compounded. If you stay in the market and dollar cost averaging new investments , disregarding the the ups and down, you can make a lot of money in the market.

 

[Flopper]

Other than attending various seminars on investing strategies and more recently asset management and social security, no paid advisors of any kind. And yes we started organizing and consolidating our stocks, DRPs, bonds etc into our primary bank and documenting everything in a spreadsheet. It's taken months, mostly by my wife who is far more organized than I am.

Depending on your situation Trusts can be useful in financial planning. They can reduce taxes and make sure your money goes where and when you want it after your death. Also you can put stipulations on bequests that you can't in a will.

 

[Lisa558]

What I am doing is buying an immediate annuity with a portion of my IRA, just enough so that the monthly payments from that combined with SS will cover my basic expenses.

The amount I will need to buy the annuity is about 15% of my IRA, so I still have the bulk of it to invest and grow - but with the security of knowing I have guaranteed income to cover the basics.