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then workers would whine their compensation via pay was less because they are getting a pension they may not ever collect
Maybe. I think if you asked 1000 current random workers, the general preference would be in favor of having a defined benefit plan as opposed to a defined contribution plan. Obviously, there are a bunch of variables like the cost of the pension to the employee, the pension plan benefits, etc. that would sway folks one way or the other. I'd also guess that historically, most pensioners receive (or received) their pension amounts as promised. So while there are no promises about pension plan solvency, I think history would show that default is unusual. Beyond that, neither investment returns nor security of principal in a 401K are guaranteed...ask the Enron employees who bought company stock for their 401K.
Maybe. I think if you asked 1000 current random workers, the general preference would be in favor of having a defined benefit plan as opposed to a defined contribution plan. Obviously, there are a bunch of variables like the cost of the pension to the employee, the pension plan benefits, etc. that would sway folks one way or the other. I'd also guess that historically, most pensioners receive (or received) their pension amounts as promised. So while there are no promises about pension plan solvency, I think history would show that default is unusual. Beyond that, neither investment returns nor security of principal in a 401K are guaranteed...ask the Enron employees who bought company stock for their 401K.
Might interesting to ask that question in a poll.
there are just to many variables ..i mean i would take my 401ks over the amount my wife gets with a nyc pensions
there are just to many variables ..i mean i would take my 401ks over the amount my wife gets with a nyc pensions
Certainly possible other individuals (maybe most) would act as you would. Our situation is somewhat unique in that we have both significant pensions and healthy 401K balances, but if I had to pick keeping our pension or our 401K, I think I would keep the pensions. Nonetheless, beyond our own individual circumstances, I was responding to your initial comment about workers complaining about taking a pension in lieu of a 401K. I can't recall ever meeting a retiree who said he wished he could have traded in his/her pension for a 401K. Human nature seems to favor certainty and predictability....in general, pensions provide that. I'm still comfortable with my hypo being closer to correct than wrong.
I used to like Kiyosaki in the past, but he has gone completely rogue (or just nuts).
Look, if you get any match on your 401k, that's FREE money you're tossing away. Not only is it an instant raise, but it magnifies your growth rate over time.
For example, if I put in 6% of my income into a 401k I get the first 2% matched at 100%, and the next 4% matched at 50% (thus $6 in my contributions equates to $4 in match) It's an instant 66% gain on my money. Any amount of money you can match is the MINIMUM you should put in.
Of course, I don't stop there, I max the 401k out every year because the tax implications are enormous. Everything I'm putting in comes off of that top bracket, which these days is something like a 33% or 28% instant savings.
A lot of people have far better match deals than what I'm getting, but there's also a lot worse out there. I think the average is a simple 3% employee contribution equates to a 3% match.
Also remember, the employer match DOES NOT count toward your individual contributions. I've made over 25k just from employer match over the past 4 years, and it's only cost me 6% of my paycheck. Granted I've also put in over 100k of my own money, some of that matched, but the bulk of it is simply tax savings (which is enormous).
For people get bonuses and such, ask to have it all put into your 401k. Employers can contribute as much as $58,000!!!, a fact that a lot of people are only aware of. Yes the "max" is around 23k of your own money, but employers can contribute far more and it doesn't cost you anything.
For example, a $2,000 bonus put into your 401k doesn't cost you anything and will keep growing. But a $2,000 bonus put into your paycheck is going to end up being a $1,450 bonus (or around there depending on your bracket and your location) after taxes. Seems like a silly amount to lose right off the bat.
Also remember, the employer match DOES NOT count toward your individual contributions. I've made over 25k just from employer match over the past 4 years, and it's only cost me 6% of my paycheck. Granted I've also put in over 100k of my own money, some of that matched, but the bulk of it is simply tax savings (which is enormous).
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To be clear….you are only deferring taxes with contributions into a traditional 401K. Ending up in a higher tax bracket in retirement than you are now, (which given today’s relatively low historical tax rates, and the significant amounts you are squirming away) is not implausible. Your total tax bill could well be higher than if you paid the taxes now. This is especially likely if you defer withdrawals until RMDs kick in, or even worse, you keel over and your spouse has to file as a single person on her federal return.
My advice (and it’s free and unsolicited, so buyer beware) is to diversify your current retirement savings. You don’t know what future tax rates will be, so try and have some money in both Roth accounts as well as traditional….in other words, pay some taxes on those retirement contributions now. I’m retired and in the midst of converting some significant traditional IRA funds to Roth. It’s astonishing to see the taxes due on those conversions.
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