401Ks are a waste of money


By tovarichpeter   Follow   Mon, 26 Nov 2012, 6:26pm   1,827 views   16 comments
In South San Francisco CA 94080   Watch (0)   Share   Quote   Permalink   Like   Dislike  

http://www.theatlantic.com/business/archive/2012/11/the-401-k-is-a-240-billion-waste/265593/

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  1. Kevin


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    1   1:18am Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    We don't necessarily need the tax benefits of the 401(k), but we do need employer-managed retirement. Most people are awful at planning for their retirement, and this country can't afford to have millions of people incapable of working relying on government aid.

  2. Call it Crazy


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    2   7:43am Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Kevin says

    Most people are awful at planning for their retirement, and this country can't afford to have millions of people incapable of working relying on government aid.

    We already have that..... the 47%ers...

  3. swebb


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    3   10:36am Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Agreed. Even with one person working and no employer match it's a godsend. Without it you are left with $10k (married) IRA contribution -- with the 401K it adds $17k.

    I'm less sure about the advantage of putting in pre-tax vs post tax, though. I have contributed to both my Roth 401K and traditional 401K and it's not at all obvious to me that the traditional is the way to go, especially if you are trying to get as much value in and are otherwise hitting the contribution limits.

    -S

  4. Kevin


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    4   9:28pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    SFace says

    The problem is it is great if you make a high income but 401K's are useless at low income level. Without tax deferred feacture, there is no way we put that much or any in retirement. We'll probably buy up more properties instead.

    People at low income levels can't buy investment properties.

  5. BoomAndBustCycle


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    5   11:00pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Only the top 10% of earners could come close to being able to put $17k in a 401k. For the vast majority of married couples... $10k IRA contribution is plenty per year. Not to mention Roth IRA are better because taxes are gonna be a lot higher in the future.

  6. ttsmyf


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    6   6:31am Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike   Protected  
  7. fil


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    7   12:10pm Thu 29 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    BoomAndBustCycle says

    Only the top 10% of earners could come close to being able to put $17k in a 401k. For the vast majority of married couples... $10k IRA contribution is plenty per year. Not to mention Roth IRA are better because taxes are gonna be a lot higher in the future.

    It's not that hard to max your 401k unless you have a big mortgage tying up your money. With all the taxes here in CA your paychecks don't even go up that much when you lower your 401k contributions.

  8. tatupu70


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    8   10:22am Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    BoomAndBustCycle says

    $10k IRA contribution is plenty per year. Not to mention Roth IRA are better because taxes are gonna be a lot higher in the future

    At most companies, a $10K IRA becomes $15K in 401K. If you get a 50% company match, you really need to put in enough to get the full match.

    The value of a Roth IRA isn't as clear as you make it. Taxes probably will be higher in the future, but your income will be much less in retirement so I'm not sure it will be a winning strategy. I don't think anyone can really know at this point.

  9. gbenson


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    9   12:48pm Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Just checked my 401k. This years rate of return is -1.5%, my 5 year return is around 3%.

    I'm making 8+% on my real estate investments (after taxes)

    Why am I doing this 401k thing again?

  10. tatupu70


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    10   12:55pm Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    gbenson says

    Just checked my 401k. This years rate of return is -1.5%, my 5 year return is around 3%.
    I'm making 8+% on my real estate investments (after taxes)
    Why am I doing this 401k thing again?

    8% after taxes on real estate is darn good. I question whether that is sustainable over the long term.

    And I'd hope that your 401K should return more over a longer window.

    But the real reason is this:

    http://www.ehow.com/how-does_4600339_compound-interest-work.html

  11. CL


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    11   2:41pm Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    gbenson says

    Why am I doing this 401k thing again?

    Of course, there are alternatives to retiring. :)

  12. Ceffer


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    12   3:39pm Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    CL says

    gbenson says

    Why am I doing this 401k thing again?

    Of course, there are alternatives to retiring. :)

    You mean, like suicide?

  13. CL


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    13   3:46pm Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Ceffer says

    You mean, like suicide?

    Yeah, but if you invest wisely, you can pay someone to do it for you. :)

  14. CL


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    14   3:49pm Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    gbenson says

    This years rate of return is -1.5%

    My one year is over 13%! Did Rove handle your money?

  15. BoomAndBustCycle


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    15   10:13pm Sun 2 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    At most companies, a $10K IRA becomes $15K in 401K. If you get a 50% company match, you really need to put in enough to get the full match.

    The problem with company 401Ks is they usually choose the one that is cheapest for the company. Meaning high hidden fees and few crappy options for it's employers. I'd much rather have the smorgasbord of an IRA to choose what individual stocks and funds I want to invest in.

    I agree, if the company is matching your money in a 401K.. you gotta take advantage of that... it's free money. But honestly, unless you work for a large fortune 500 company.. most small businesses aren't matching your 401K contributions.

  16. HEY YOU


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    16   11:15pm Sun 2 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Whenever I see anyone mention a % return, have they taken into account inflation?

    Never trust the Gubberment figures?
    A different estimate:
    http://www.shadowstats.com/alternate_data/inflation-charts

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