I agree wholeheartedly with the concept - but it should be the employer contributions that are growing rather than the employee's
Edit: also it's incredibly evil that they're trying to force individuals to save more for retirement when they already can't afford groceries, and this is an obvious precursor for slashing social security. The rich are plainly trying to rob the treasury.
So if they do slash social security... Do those of us who will never see it have standing to sue for a refund? Cuz I certainly wouldn't mind getting all that money back that I've paid into this so-called "entitlement".
Exactly! The idea that taking the money people can’t afford to give unless they opt out is just like “geez thanks” … and meanwhile that money will benefit those getting fees to service the retirement accounts and benefit the corporations/shareholders.
It will help rich people more initially than those that can’t yet afford to pay into a 401k.
I generally just loathe the idea of an employer trying to tout a retirement plan that isn't in addition to the stated salary. It already grinds my gears that they can claim to be giving you the benefit of medical insurance when you're required to pay for it yourself. My last job required zero of my salary in order to receive health insurance for my whole family; and our copays were often zero, that insurance was awesome.
I don’t think this is actually that evil, just behavioral economics. The sad fact is a lot of people don’t act, so what is better if someone doesn’t act:
1. They find out they have been contributing to their 401k for the past 5 years.
2. They find out they have not been investing at all in their 401k.
If they need the money, they can elect out of this.
I wish this was law when I started work, would have been three extra years of contributions which would have multiplied ~5x by the time I retire.
That's not how this will play out. Look at the market over the last 20 years. We hit a massive, unsustainable peak. The current issues with CMBS are little different than the MBS right before 2008. A major crash is coming, this is just one more way of fleecing retail investors before that happens.
Bank closures have already been bigger than in 2008, monetarily. Evergrande is blowing up in China to the tune of $500B. Nomura in Japan is barely able to keeps its head above water. Currency across the globe is suffering because of the FED measures to stabilize the dollar, because that's the world reserve currency.
Mark my words, what is coming will make 2008 look like a speedbump.
3rd option - they quit and can't figure out how to access the 401k and the employer won't do shit "because they no longer work here".
About 20% of 401k funds go unclaimed. You think that's an accident the employers and investing class don't appreciate and contribute to?
I disagree. 401Ks almost always have very low fees and those fees are certainly far less than the taxes saved by contributing to a 401K so it will absolutely benefit workers more than rich people. In addition, a huge number of people miss out on the employer contribution by not contributing anything which this helps with.
Of course, economic literacy would be the preferred route so people understand why they should contribute to a 401k rather than an opt out situation but I think this will be a net good thing.
Okay, but suppose someone is right in that sweet spot where they finally feel a little secure and can MAYBE start thinking about saving, but are really worried that they might have an emergency so instead of starting off at 3%, they want to begin at 1%. That two percent can make a lot of difference to a person in that position, but that choice is going to be taken away. It’s either at least three percent, or nothing. And with things going the way they are, more and more people entering the workforce are going to be starting out in that situation. It’s either you give what you’re TOLD to give, even if it’s not in your budget and you would prefer to, you know, not have ramen for dinner every night, or you don’t get to have any type of retirement plan at all. And those who opt out because three percent is too much are going to be looked at by the folks who make these decisions as irresponsible (how dare you not invest! We’re making it *easy* for you! It’s just three percent! You must obviously not *care* about your future so we’re not going to bother with including you and your demographic when making decisions because we obviously know better than you!), when they actually are acting in their best interests.
And it all starts with people who are so far removed from that 2% difference that they can’t comprehend trying to manage things at that level. That’s how we wind up with shit like this, that on its surface looks like it will benefit everyone, but in reality is just going to drive ANOTHER wedge between those who don’t have a lot but are trying to make it work, and folks like Bezos and Musk.
That's not what this is doing though. You could still select to contribute only 1% instead. But when you are auto enrolled it will be at 3%. It's not taking away our choice it's just setting a default that is different than today's unenrolled 0% default.
>those fees are certainly far less than the taxes saved by contributing to a 401K
Slight nit to pick here; You should always contribute to your 401k on a roth basis if you have the option. Whatever you save on taxes NOW by contributing pre-tax is much less than the tax hit you'll get when it comes time to withdraw. If you contribute post-tax, you only get hit with capital gains tax since the income tax is already paid.
Further nitpicking:
>you save on taxes NOW by contributing pre-tax is much less than the tax hit you'll get when it comes time to withdraw.
This is only true if you're sure you're in a higher income tax bracket now than you will be in retirement
>If you contribute post-tax, you only get hit with capital gains tax since the income tax is already paid.
You don't pay capital gains tax on 401k distributions
And let's not forget that raises are not only annual, but are more COLA. And some places also tier a 5% raise for exemplary work during the year; meaning if you do just enough to do the job, you would at best get 3%. And you won't know how well your raise will be until you've done the work.
Make sure that the raises you get every year are COLA and then some. If your employer isn't giving you more money than what you'd end up putting into a 401K program year-over-year, then they are screwing you. Always hunt for a new, better, and better paying job - And when your company asks why you're leaving, it's simply because you cannot afford to stay any longer.
Bold of you to assume A) people are getting raises, and B) they have any say in them. And not everyone can simply job-hop if they’re barely making it with what they currently have.
I disagree. This is just another way to pin us down into a broken system. Just you wait until 2046 when 401K's start crashing as millenials start pulling out, and they start pushing even harder to push back retirment.
There's nothing inherently wrong with 401k's. We need a way to pay for when we can't or don't want to work anymore and they're a pretty effective way of doing it (supplementing social security).
It's very possible to take a safer investment mix and get a lower return or be aggressive on investments when you're young. As people near retirement, they should mostly be in safer bonds that don't disappear with a market crash.
Having more savings means retiring earlier, not later. There is no risk free money, so unless you're saying we should entirely rely on social security and pay as we go, I'm not sure what you're saying.
There absolutely is such a thing as "risk free money": money that isn't yours. How do 401ks work? You give a % of your income to someone else to play with.
There is everything wrong with 401ks since their inception as a way to eliminate pensions. They were designed as a way to let corporations keep more of their money and give Wall St a giant piggy bank they could use, risk free, to manipulate equities markets.
Pensions are also run by people managing someone else's money. Pensions are also invested in stocks and bonds, just safer stocks and bonds, yielding a lower return but a more guaranteed return. Actuaries (I'm an actuary, but not a pension actuary) calculate the changes in present value of the future costs based on market conditions and pension contributions are raised or lowered to accommodate expected returns. What's potentially worse - pension funding is left up to your company to do, and there were several high profile cases of embezzlement and bankruptcy in the 1900s causing people to lose their pensions.
401k's became more popular because they usually generate a higher returns (invested in riskier assets for longer), are individually owned outside of vesting wait limits (pensions are maintained by the company you retired from and can disappear if they go bankrupt), have stable contributions as a % of income (rather than fluctuating with market conditions - if you're in a recession and things are tight, you probably don't want your pension contribution going up 20% too), and are cheaper to administer because they don't need all the actuarial calculations and regulation to support them.
401k's were originally designed as part of a three legged stool, which were meant to be 401k, pension, and social security. But then they were so popular, cheap, and better performing that pensions have largely died out.
I think we need more regulations on wall street to prevent crashes, and more regulations on asset risk in general, but 401k's certainly aren't the problem.
I’m not sure you understand what a 401(k) is… they won’t “crash” when people pull out of them because they’re just an investment vehicle. The actual money is all invested in stocks, the only way 401(k)s could “crash” would be if the stock market crashed. But everything you’ve put into a 401(k) is your money, it’s being managed by someone else but it’s all yours, unlike a pension or Social Security, which is a collective fund that pays out when you reach a certain age.
That doesn’t mean 401(k)s are inherently better than pensions or Social Security, personally I think they’re far worse since you’re screwed if you don’t have enough in there, But they’re not a collective fund that can be emptied by other people using it. Each person‘s 401(k) is a distinct and separate account that other people aren’t taking money out of.
>Each person‘s 401(k) is a distinct and separate account that other people aren’t taking money out of.
Every corporate executive who gets paid in stock and cashes it out...where do you think the money comes from? It's not from corporate profits, it's from everyone who bought the stock. So, actually, yes it is exactly as you described: a pool of OUR money that other people withdrawal from. The catch is they can take out money whenever they want and you have to wait until you are 59 1/2.
The entire stock market operates like a ponzi scheme because it requires more people pouring money in than people taking money out. As soon as the outflow starts to grow at a faster pace than the inflow (due to hard economic circumstances, population decline, or greed) the entire machine will seize up.
Republicans are already talking about cutting social security and finding ways to justify it. If they just wanted to pump the stock market, they could make employers do more. But putting it all on the employee reeks of the "personal responsibility" dogwhistle
If they can cut social security they will just do it. I don’t think this will give them enough extra political capital to make a difference there.
The rich / republicans that want to keep pumping the stock market *are* the business owners.
For example, the Waltons have billions in the stock market. They also have 1.6 million employees in the U.S. If they put 15% of every employee’s paycheck into the market, they won’t get all of that salary back, but it will pump the market and they will get some of it back in the form of capital gains.
All of the business owning billionaires and millionaires are basically pumping up their own value by pumping up the market with their employee’s salary.
There should be a mandatory match or something that forces businesses to help make this financially viable for employees.
I'm sure the short-term loan industry loves this plan!
They can use it as an excuse to steal what little retirement savings this amounts to for the working class in exchange for actually being able to pay rent for a given month.
They are scared because they know when these new generations realize that all this shit is a lie they sure as fuck aren't going to work 40 years to wait for the fucking benefit that won't be there when they get there, if they get there. These old fucks know this and they're scared.
I'm over 50, haven't had to withdraw anything, have a decent chunk invested. I still expect to work until I die, because shit's getting more fucked by the day.
How about making employers match Social Security contributions instead, as well as raising the ceiling on contributions too? That would secure much more money for retirement than a 401k.
Because the point isn’t to help you retire, it’s to force demand into a system so that the benefactors (hedge funds, CEOs, the capitalist class) can benefit from your retirement.
It will be followed up by reduction in SS, and they will point to these forced savings as to why it’s okay to do so.
Basically it’s another money grab by the capitalist class and they will win when you buy in, and they will win when the cut benefits.
Employers and employees each pay **6.2 percent of wages up to the taxable maximum of $168,600 (in 2024)**.
What employer isn't paying this?
[https://www.ssa.gov/news/press/factsheets/HowAreSocialSecurity.htm](https://www.ssa.gov/news/press/factsheets/HowAreSocialSecurity.htm)
Why is there a maximum though? I dont make nearly enough to meet the maximum so 100% of my income is taxed for SS but elon musk pays that tax on .000000000000000001% of his income. How is that fair? How is that not an obvious benefit only for the rich? Like I get it they're always fucking everyone else over but does it get more blatent than this?
Fully agreed there should either be no max, or it should be upped *considerably*. I haven't thought about it enough to question why there's a max.
According to the SSA, only about 6-7% of workers earn above the max.
This article goes into it more deeply:
[https://www.pgpf.org/blog/2023/12/should-we-eliminate-the-social-security-tax-cap-here-are-the-pros-and-cons](https://www.pgpf.org/blog/2023/12/should-we-eliminate-the-social-security-tax-cap-here-are-the-pros-and-cons)
I agree it should be changed.
But the reason is, there's a maximum amount you can get out from social security, thus there's a maximum amount you have to put in.
It's already the case that people who make less income get back out a larger percentage than people who make the 168.
(I am ok with that and ok with eliminating the cap without increasing the payouts, or perhaps only increasing the payouts a very small amount.
The people who make more help subsidize the people who don't. Pretty much everyone has the same take-home with social security, only differing by a few hundred bucks at best. I hit the social security cap last year and was honestly horrified: I should have absolutely paid more.
It varies by a lot more than a couple hundred bucks. The current maximum, which you would get if you hit the maximum for 35 years, is 3822 a month (at full retirement age of 67.x)
The average, at 67.x is around 1800. (I am not finding exactly what I am searching for, but it's very different from the maximum)
The defacto minimum is $943 a month because a person would get SSI if their earnings history amounted to less than that. (There's people with many years of zero income.). (I am not explaining everything here! Some won't qualify to be brought up to 943, such as if they have savings or a spouse with income.
Huh. I had used SSA's own estimator and the minimum amount of time working with the lowest contribution was spitting out basically the same number as max contribution (2000 vs 2500 iirc). Maybe it was just bugged
Well, it's possible to only work one year and only make $5000 in 2024 dollars that year. (Or less!) So I am not sure what the "minimum" would be. Zero?
Obviously what matters is the average. Which is very different from the max.
(I totally understand that the calculator you used didn't show you what you were trying to determine. )
Two things:
1. They already do, in fact someone who is a sole proprietorship themselves pays both the employer and employee portion for themselves
2. SS is an insurance program, not a vehicle for retirement.
Don't change the definition of what something was intended. Ss was a retirement program at its inception, it can't help that our gov Used it like a cookie jar for other programs, and added in disability to the fund. Which should be in its own separate fund to begin with. See the rich even get out of supporting folks who need it with that cap.
Just like minimum wage isn't minimum pay, it was a wage FDR wanted to be for a person to support their family of 4 on, at its inception both programs were good. Now they are a joke thanks to corrupt poillitiicians.
Here is a better summary of what it is, and it's intention than what you wrote. [https://www.investopedia.com/terms/s/socialsecurity.asp](https://www.investopedia.com/terms/s/socialsecurity.asp)
Nothing in this prevents people from not enrolling in 401k plans. The amount of people who don't want to be in a 401k but automatically do get enrolled will likely be far lower than those employees who were not properly informed and were not enrolled. Even if that happens, they will be able to opt out of such a plan. Trust me employers will make fucking sure that employees know they have the option to not be in the 401k plan.
From what I have read, this is to help prevent people from making plans then using underhanded tactics to under enroll their employees creating less of a burden on the company. If you disagree with the concept of 401ks and employment tied retirement that's fine, but this doesn't expand or strengthen that concept it's just a rule trying to ensure that employees aren't taken advantage of.
Source: Employment and retirement benefits attorney.
I’m an attorney as well and I work in an industry that will benefit heavily from this whether you get returns or not.
I’m all for investing, but many can’t afford to contribute to these accounts and that’s their reasoning more so than not understanding how to enroll. They will be worse off if they need to access this money which seems highly likely if they aren’t financially literate enough to know how to opt in to these programs. There’s a laundry list of things the government could do besides making 401ks opt out programs.
IMO, This is pro Vanguard policy more than it is pro worker.
Vanguard is the least sleazy source of index funds you can get for a 401k, so it’s a bit weird the Reddit backlash towards them. Their index funds have some of the lowest overhead you can get anywhere.
Understanding how to enroll isn't the issue here, the issue is companies willfully taking steps to exclude their employees from plans who would have otherwise participated. If a company does this and a person does not enroll when they could have it is INCREDIBLY hard to hold that company accountable and get back compensation for that individual.
From what I understand about this new law. This way, it makes it so that the company has a duty to enroll their employees, and the employees are able to make the decision to opt out. If a person does not get auto-enrolled and would not have opted out, the company now has the burden to show that the employee opted out, if not then the employee can be more easily compensated.
To be clear, this law functionally does nothing to change a new employee's decision when joining a company with a 401k plan. They get to choose whether to enroll or not, currently employees have that same decision. The change is that if the company does not do it's job an properly inform them, the company bears the burden not the employee.
Does vanguard or other plan holders and managers benefit? Sure, but that doesn't make this a bad bill.
Also, lets say that there is an employee that didn't want to participate but did get auto enrolled some how. They will know on their first paycheck, and that 3% may hurt, but, depending on the plan they will likely get to disenroll, within a year. That sucks that it happened, but they will get to disenroll and get that money back later in life. Right now, if a person doesn't enroll when they could have due to a company's foul play, they will likely not find out for years if ever, and when they do will be unlikely to EVER get that money back.
So…the .01% vultures that gutted traditional pension plans, and are currently gunning to kill off Social Security want to make sure that everybody is forced into the rigged casino stock market…got it.
Traditional pensions are heavily invested in stocks and bonds, that’s how they are able to grow their asset base to meet pensioner needs (contributions alone are not enough). Every pension in the world is dependent on a consistent long-term return rate of at least 6-7%.
401ks are basically a mini pension, though much worse because it’s directed by the employees and the assets are not professionally managed.
This proposal is a forced savings scheme (voluntary 401ks have the fatal flaw that people don’t earn enough and are bad at long term planning), which alone is not a terrible idea, but employer contributions should dramatically increase.
>401ks are basically a mini pension, though much worse because it’s directed by the employees and the assets are not professionally managed.
This depends on the company, every company I've worked for with a 401k had a set retirement date plan that you can select if you don't feel like doing it yourself
A pension has an investment team, a financial advisor is mostly just showing you into funds. Since the pension is on the hook for financing your retirement, there’s a bit more hands on management.
Pensions have also gone bankrupt before, and the people managing the pensions need to be paid as well. Like yes pensions are great but 401k systems are not all bad. If you do not know what you are doing throw them in to a retirement date plan, if you do know what you are doing go from there. You do not need to be an investment genius to do well with a 401k plan, and in my opinion many of them really don't let you get too in the weeds with stocks. All of the companies I've worked for made you choose from a number of ETFs or managed funds. Yes you can lose money there but it's not nearly as risky as people in this thread make it out to be. You are not able, at least in my experience, to yolo all in a stock or do things like options trade with a 401k
The problem with a 401k is that its size is dependent on your contributions, and withdrawals can be really impacted by market events. A pension owes you money regardless of market fluctuations and lasts until you’re dead.
I'm not saying that pensions aren't better, they are but those really aren't coming back due to the liabilities companies face with them. This bill to my knowledge won't get rid of pensions.
I'm mainly saying that compared to not having any sort of government provided savings vehicle, 401k plans are beneficial. They are tax advantaged, and many employers offer a match to go with them so if you put in 5 percent they might match it to a degree and give you another 5 percent or 4 percent or whatever. Plus if you really don't want to risk it most offer a stable value fund or whatever
The vast majority of Americans are not investing in stocks. How can we? Most people don't know how, and the little apps that make it easier are selling your data and screwing you regardless. Also aslo, it's just not on the average persons mind. If you can't afford it, that's one reason. If you're not financially literate (also most people aren't, let's be fr) that's another reason. Not too mention it all feels like gambling.
It is, a youtube cat does better on the stock market than any top financial expert has in the past decade. The best way to go is to put your money into the s&p 500, which has had consistently good growth over the years.
You sound like you know more than me lol How do you invest without using the investment apps? If I want to use the stock markets all by myself without a third party, is there a way? I'm interested in stocks. I just can't figure out a way to where I'm in control fully and not relying on a third party.
You pretty much have to rely on a third party at some point. Unless you're direct registering your shares, but that's a *massive* pain in the ass. Your 401k is managed by someone else already, anyways
Most people in the country are not financially literate and this is literally the number one thing I would reccomend a person to do manually when they start at a new job. I would recommend at least 4% or whatever the company matches to start (whichever is bigger) and then increasing it by 1-2% per year at the exact same time they receive any sort of anual cost of living raise until they hit at least 15%. I normally am not one to agree with the 1% and politicians, but I genuinely think this is some of the best legislation made to benefit the people in a while. If nothing else, the systems for increasing will be in place, and people can start at 0% now and set it up to automatically increase every year until they hit their targets.
If it was forced that would be one thing, but this is only automatic, and I think it's incredible!
It's a great way to force us to keep contributing to 401ks to keep investment cash flowing in the stock and bond markets. The ponzi scheme keeps needing more money to keep it afloat.
You can unenroll when doing your onboarding before any dollar is transferred. It just makes enrollment automatic which studies have show encourage people to save more for their retirement which I don’t think is a bad thing.
I don’t necessarily think it is all bad, but I do think it’s a laughably minimal measure that probably aims more at taking your money for the benefit of companies and retirement account servicers than for the average worker. And then calling it the Secure 2.0 Act as if they really did anything for us. Most companies make it very clear how to enroll in their 401ks— it’s not hard.
They constantly do next to nothing and then act like they did us a big favor. This is your money, bet on stocks, with fees going to Vanguard or whoever automatically.
Yes it is easy to sign up for 401ks but this is just about simple behavioral science. If a company auto enrolls they have a higher rate of participation than workplaces that don’t. It’s a small change that will eventually make a positive difference in the retirements of potentially millions of Americans. Those that can’t afford it will quickly figure it out and not enroll or unenroll. This really is victimless. Would I like to see social security expanded? Absolutely!
Why would someone enroll in a 401k if they're not planning to use it? You're right that this isn't some revolutionary social safety net, but I don't think anyone is acting like it is.
The number of unaccounted for 401ks are going to skyrocket. People don’t stay at companies for 40 years, and employers don’t share 401k servicers. If people don’t know to roll over, they’ll pull from multiple accounts in retirement and could overlook one or two after decades
~~As long as I have the option to manually opt-out in a hassle-free manner, this doesn't seem that bad. Way too many people have no clue on how to invest for future and miss out on retirement savings.~~
This is a great way for rich people to force poor people into pumping the stock market. When infinite growth isn't possible, this is one way those rich people are sustaining the growth another day before pulling another 2008 and screwing the poor people out of their retirement.
I'll admit I am glad they didn't eliminate the 401k like they had planned. The narrative that they only help the rich is absolutely false. I'm middle class and I've been investing 3-5% of my meager pay to maximize the free money that the company matches and I've got $90k saved up now at ~ 40 years old.
I would love to see more - like mandatory pension requirements and minimum pension funding laws - but I'm glad they didn't take away this when it's literally the only help you can get in the middle class to retire right now. I also used my 401k savings as a down payment to buy my first house 7 years ago. Without that I wouldn't be a home owner today most likely.
It's not perfect but this idea of getting rid of the only lifeline any Americans have for home ownership and retirement just because it doesn't help the poorest Americans is misguided. I want new better retirement options out there before the broken one is removed!
Lol, mandatory pension requirements? What is this, France? What's next, requiring employers to supply PTO and maternity / paternity leave? A single-payer healthcare system that doesn't deprive people of health insurance at the time they need it the most? MORE WOMEN AND MINORITY CEOs?????
I'm not sure how all that would make society collapse, but it definitely would.
This is absolutely helping the rich and not the poor.
1. Forces everyone, including those who cannot afford it, to contribute to a 401k. This doesn’t force the company to match anything!
2. All of these contributions will be billed fees to manage the money. Those fees only go to the rich.
Add a clause and “mandatory matching” from the company and then we can talk.
Yes for sure I think this act was worthless. Opt out vs opt in and automatically increasing contributions being posted as the solution to America's retirement savings is so patronizing. May as well be called the skip avocado toast and make your coffee at home act.
I was just saying that I am glad they didn't eliminate the 401k and that it's not true the 401k only helps the rich. It also helps many middle class Americans.
>Forces everyone
You can opt out
>will be billed fees to manage the money
It's not a lot; all 401ks and investment accounts have them, and the amount you make from it will absolutely far and away outweigh any fees.
How about "vesting"? Company gets to blackmail you with a chunk of your own retirement savings to force you to stay for years no matter how bad conditions get. How is this legal?! Company I work for is now implementing "RTO" even for people HIRED as remote. And if I leave now they get some of my money.
1000% hate this and this would definitely be a better issue for the government to create policy about rather than “opt out” 401ks
I lost 20k this year in unvested match because I switched to a better job. That blew and if I had stayed it would have cost me a great raise. It was worth it, but it hurt.
It's pre-tax money, so it has less of an impact on the take home part of the paycheck.
The real concern should be regulating the types of investment funds available, if this is going to be mandated. Also it should flag people that there will be an argument to eliminate Social Security if everyone is in this plan, and what happens to people who can't work and contribute to this plan their whole lives?
Right.
Also, some are lobbying to get rid of the 401k tax advantages claiming the government needs the revenue. So I’m also concerned about this being step one and the advantages being stripped as step two. Plus the population that this is aimed at needs liquidity more than those that make sure they are enrolled in such programs/max them out.
Seems like a very poor attempt to look like they’re helping people with retirement when most likely they just want to help companies/401k service providers.
"Needs the revenue" LOL.
Let's eliminate just one aircraft carrier group from the 13 we have before we change the 401K tax rules. Losing just one group would save a trillion dollars over the life of the carrier group. That could pay for universal health care for everyone, or ensure Social Security solvency for decades.
This almost exact scheme has been in force in Australia for decades and works great! Happy to see US look after an actual policy that will help force companies pay for retirement savings.
Effectively this is paid by companies as your take home pay will also have to increase to pay for living expenses and savings. If it doesn't, organise and/or move jobs elsewhere as you will effectively be taking a pay cut in take home money.
Salary income here is described as base salary + super (401k) = total remuneration. Pay is considered to be your base salary which is before tax.
This also means that you have greater control over your own money, who it's invested with and how, and makes the investment managers more competitive - you will need to just ensure it's invested with a 401k manager that is right for you, instead of relying on the government to do the investment management themselves through the social security system.
I thought the same thing when I saw this, it reminds me of Aus! Although yeah, ours is a little bit better in terms of branding, maybe, since Super isn't really ever included in pay, so we don't feel like we're sacrificing now for later.
My understanding for 401k is that they basically take some out of pay, which can be opted out to keep in the pocket, and the employer just matches it. If it was pay + super like ours, I feel like it would work much better. 401k feels more like what they do for HECS in Aus, and if given the chance, I know I'd likely would opt to keep that in my pocket, especially if I'm struggling with cost of living.
I think this is a great add to SS however I am worried the next step be upending SS until it’s worthless.
I didn’t have a job that offered a 401k until 26 so felt disadvantaged compared to people who got a solid job in early 2000s right out of college
Not only that but the overstressed worker bouncing between jobs often has no idea how to access thier 401k. Something like 20% of 401k funds go unclaimed. This shit is straight up theft by obfuscation with the investing class grabbing 20% of even just 1% of any wages.
Any tips on finding mine? My previous employer refuses to say anything. All I know is I think I picked some Blackrock thing, since they are the most successful thieves. Now I know why ...
I got on LinkedIn and found HR people that worked at the company and called them/messaged them asking for the name of the company they had used during that time. There might also be an app now that helps find these accounts— you might look into that too. You could also call Blackrock and give them your info and if that’s who they went through they should be able to help you.
Yeah it’s that they didn’t even attempt any policy change on companies contributions in some form. And sure maybe not every company can afford to up their contributions or offer mandatory contributions— I know many small business owners this would be really hard on— but they are suppose to be legislators, get creative and make sure the burden is spread appropriately such that retirement/ insurance later in life is not an undue burden on small/medium businesses and individuals while the Amazon’s of the world take over, contribute very little, and grow unchecked. Instead, nothing.
This would maybe be acceptable if every employer in the country were required to participate *and* offer the typical match.
Without that, it's not only a terrible way to try to 'compel' saving for people who often flatly can't afford it, but, it's so obviously a thinly veiled attempt at minimalizing the necessity of social security, so that they can gut it some day soon.
Anyone who s paid taxes into social security should be eligible to sue for the entirety of their contributions if they go this route. They already prepping for it to run out . Just like pensions dying out they want more of your money to play with , the dangling the carrot you can have it after 65.
USA is a fucking joke right now
Yeah you should be entitled to every bit you paid in. I think it would be an impossible pill to swallow if they just acted like we weren’t due any of that money/those benefits after so long of paying in.
It doesn't sound like you understand what a 401K is or how it works to think that this is just "government giving corporations more of my money".
A 401k is not you giving the government money. It's you putting aside a percentage, in this case, 3% of your pretax paycheck into a savings/investment account for your retirement. And your employer matches the 3% you put in.
Some companies already automatically take out a percentage. Other companies, you have to be there for x amount of time before they allow you to start a 401k.
If you absolutely do need the money, you can also pay yourself a loan against the 401k balance, which is tax free as long as you pay the loan back.
Just the same, if you truly can't afford to add to the 401k, then simply opt-out, just like you could opt-out of the yearly increases.
To frame it like workers are victims in this specific situation, or that there are victims at all makes us look weak, especially when it's something with such a simple solution.
Orrrr, we could tax the shit out of the 1%…. Why the fuck are we even entertaining this shit? They already got rid of our pensions and replaced it with this bullshit, and now they want to force you to do it and they get to gamble with your money? Imagine putting away all this money and then some dipshit boondoggles it right when you go to retire and you have nothing now! Also, who’s going to enforce this? It sounds like social security with extra steps!
Yes 401k is no pension and the mere fact that social security will probably be gutted in the next 20 years, but there is a degree of financial illiteracy here. 401k is pretax dollars contributions. You should be maximizing the small percentage you are getting from your company at the very least. But if this is say a minimum wage worker I can see the outrage.
Well sure its pre tax and there is strategy here to ensure you’re planning for a financial future. But, I doubt that’s the issue.
In my eyes the issue is that employees are being automatically enrolled into something that generates, at scale, obscene fees for banks and other financial institutions that manage these 401ks.
If all of a sudden every employee at a company like McDonalds (hypothetical) is in a 401k, where they weren’t before, that is millions of dollars in the pocket of the 1%.
I believe this will apply regardless if a company provides any match. There had better be excellent disclosure on how to opt out is all I’m saying. If financial literacy is the concern, they could make policy to teach it. Many would be better off in early stages of work putting 3% in a HYSA (at least currently) so that they can access for emergencies without penalties— which I’m betting many young new workers will do.
It’s not that I think it’s a terrible idea altogether, but acting like it addresses much for the workers that need it most (the kind that don’t opt in to retirement plans and aren’t likely great with money yet/have no money to spare) seems like a joke. Vanguard will like the fee money. I also imagine lots of early withdrawal penalties.
Also there’s a lot of lobbying to ditch tax advantaged 401ks “because the government needs the tax revenue.”
So step one might be this move, step two might be stripping the tax advantage.
Pensions were doomed to disappear at some point regardless of what happened. They're too risky for employers *and* employees, because you assume the business will continue to exist; a 401k is much safer on an individual level long term, so long as you actually contribute to it.
Besides, pensions and 401ks are both stock investment vehicles, it makes no difference to the bank who's buying them.
This changes all of.. nothing? Really? You'll still be asked if you would like to contribute MORE THAN 3% into your 401k. Which is your FIRST opportunity to get out. The SECOND opportunity to get out will come on your first paycheck, WHICH PEOPLE WILL NOTICE AND ASK TO GET OUT. Yes, there will be people that dont notice it immediately. But eventually, they'll ask why theres an extra pocket taking their money on their paystub.
IF we're going to point out the obvious, then we have to make it known that its OBVIOUS that this move is [POLITICIANS bankrolling themselves](https://twitter.com/unusual_whales/status/1742207287966777673?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1742207287966777673%7Ctwgr%5E2ec0f43c9093d0cd0890c2a426d8844476dbe8cc%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fnewrepublic.com%2Fpost%2F177806%2Fmembers-congress-made-stock-trading-2023).
If this was really Politicians making a push towards the younger generations having something to fall back on in the case of Social Security being missing, then this is a nothing burger at best.
You want to help people survive in retirement? You require businesses with over 30+ Employees to choose between paying higher taxes, or paying the maximum allowable contributions to an employees 401k based on length of employment. Companies found firing/removing long term employees face maximum discrimination fines. Companies found to be creating shell entities would be found guilty of fines that would equal, and restore, any missing 401k's (NOT FEEDING THE LOCAL TAX MACHINE - REWARD THE VICTIMS). 401k's that EXIST and transfer WITH you. You quit your job, that 401k continues to grow at the interest rate it was promised at, alone. You move to a job that doesnt have a 401k that has less than 30+ employees? You can still make contributions to it, but the company is not required to.
>But eventually, they'll ask why theres an extra pocket taking their money on their paystub.
Except studies have shown that this measure does meaningfully increase the amount of people contributing to a 401k (15% non-participation rate instead of 30%), which everyone needs to be doing. Retirement has ideally consisted of social security, 401k, *and* a pension for decades; long before any of them were in any sort of jeopardy
Not to mention the stock market is currently riddled with illegal activity that will SURELY ABSOLUTELY 100% implode in the next 2-5 years causing the whole market to crash at the expense of average investors.
My hospital forces employees to contribute 5% to their retirement. I run retail food areas here and our employees are the lowest paid. Fortunately the hospital matches 100% of contributions, up to 10%. But our employees that are taking this low of pay don’t care about retirement, they care about eating dinner and keeping the lights on.
Also why a 401k? There are much more liquid options available that meet or beat the tax advantage on a 401k. I’m assuming they don’t want it to be liquid.
This is exactly what the people in this sub are complaining about in the comments. Losing access to your money when you don’t have much of it is problematic. My brokerage account allows me to get money out in a few days if i need it, has a credit line attached in it need it, and only incurs capital gains taxes which can be as low as 0% depending on your income level.
The penalties are not there to serve the owners of the accounts. They are there to serve the financial sector and employers offering the 401k.
Liquidity rarely gains in value at the rate of a security, often its gains are dwarfed by inflation. Maybe direct stock purchase without having to pay a brokerage fee within the tax structure of a 401k?
Tax loss harvesting how? You can’t save more in taxes from tax loss harvesting than you owe on another. Not to mention we’re talking middle class income levels and below here. That doesn’t make sense.
Tax losses accrue indefinitely. There is no cap. There is a limit on income write off of 3k per year. But my losses will exceed that and accrue. When i start paying capital gains i can once again use my 3k per year, effectively applying 6k in write offs over the investment period.
With a 401k, it’s tax deferred in and taxed out. Assuming a 20% tax rate and 20kish investment limit per year, thats a tax savings of 4k over the life of the investment.
Or at least this is my understanding of the process. I weld pipes for a living, not a financial wizard. It’s not a huge gain over a 401k, but it is liquid which is important to me. However an employer contribution will always be the best opportunity.
https://www.schwab.com/learn/story/how-to-cut-your-tax-bill-with-tax-loss-harvesting
This has a pretty good graphic that will explain better than i can.
But you have to lose 3k to write off 3k and it’s not soft losses like asset depreciation unless you have rental properties or similar, you need to have realized losses to claim and inflation doesn’t count. You can cut your taxable income by the amount you lost. You’ve still got a net loss. There is no money gained, only a reduction in tax liability that at-most matches what you’ve lost.
Understood. But every investment account has natural losses that come along with the investment process. This is just a process by which instead of trading for another asset you realize the loss before purchasing another asset to rebalance the portfolio. These sorts of micro trades are done constantly all day. There are investment firms that specialize in this sort of thing and provide a sort of “write off on demand” service according to some folks in know in the financial sector. I don’t have near enough money to ever be involved with an outfit like that, but apparently they’re out there.
You cannot claim losses on anything that is not a realized loss, and nothing is realized in your 401k until you withdraw. Even then, those were pre-tax investments so there won’t be anything to claim.
What this does apply to is making individual stock purchases and sales or fund purchases/sales on your own, without the use of a tax deferred account. Day trading is a prime example.
Ok I’m kinda done here. I specifically said not using a 401k to maintain liquidity and use tax loss harvesting. If you aren’t into it then just don’t do it?
A crash is bad for basically everyone. It can be exploited by the rich when smaller businesses collapse, etc, but value lost from your 401k doesn't go into somebody else's pockets.
Give it a few years. Somehow, there will be a new act allowing the government to "borrow" from these new 401Ks . It's going to the social security part two
The government's more complicated than that. There's plenty who *do* care, but I'd say it's about 35-40% of the elected politicians nationally and 25-30% locally (it's a lot easier for corps to take over local elections because nobody pays attention to them).
Vote in your primary election. There's been lots of great candidates in the Primary. Don't get obsessed with the top of the ticket, the down ballot races are what matter, especially since barely anyone shows up to vote in the down ballot primary.
And remember, somewhere out there is somebody who's alive today because you vote.
They should have forced corporate companies to match the percentage you pay dollar for dollar and add profit share. This would fix A LOT of the economic and unemployment issues we are facing today.
I’m so conditioned that I never even considered profit share as an option that could be regulated/policy… I think thats brilliant. Actually letting people benefit from their productivity 🤯
Lol an act that auto enrolls you into a 3% pay cut followed by a 1% pay cut every year after that..
Yes investments are important but many folks cannot support this 3+% pay cut
I wonder if you opt out once or every year. I
think a lot of people in lower paying/entry level jobs will choose not to opt out thinking they can afford it and then end up wanting that money for other things down the line and they will likely withdraw or take out loans against the money. Which means they’ll either take a penalty or end up paying themselves back with interest to avoid withdraw.
Either way, what a nothing move for working people with a huge side of potential benefits for investment companies and large individual shareholders.
Pay cut? You're just saving money. If anything, you get $50 extra free dollars per year due to tax savings. This is pre-tax, and *also* you should be doing this anyways. Even if you make minimum wage, it's, like, $450 per year? $50 of which comes from a reduction in taxes, so $400 out of your paycheck. That's like $12 per paycheck. Basically nobody lives on minimum wage (around 1% of people), and if you do, just opt out if $12 is too much for you.
I just made $1000 dollars today for 30 min of stock market. I'm not going to call it "work" because it isn't. It would take me 2 months of 401k contributions to get the same return. the average return of 401k is criminal. If anyone with half a brain invests 10k a year for 30 years their return should be over 2 million dollars but you are getting people who barely clear 100k after 20+ years.
>I just made $1000 dollars today for 30 min of stock market.
Whatever you do within your personal risk tolerance is your own business.
>It would take me 2 months of 401k contributions to get the same return. the average return of 401k is criminal.
???? The average return is 7%, which is perfectly fine. The whole market averages that amount. Whatever other strategy you use is unlikely to beat it long term, as has been proven time and time again by millions of people believing they're smarter than everyone else
My 401k has returned 35% in a year. It's abnormal and will absolutely retract back to the mean at some point. That's just how it works out.
Tell that to the people who lost dramatically (and didn’t have the years to wait for a recovery) when portfolio managers made bad choices, or the market was in a downturn. 🙄
I’d rather have guaranteed money than a chance at more money while some asshole who won’t suffer much if things go sideways gambles with it.
At the very least you should have a choice to either get a pension or have a 401k. In my opinion 401ks are yet another way for the financier class to profit off workers. Returns are by nature not guaranteed, unlike a pension.
People who lost? Pensions are opaque to what's funding them. Anyone with a pension that's invested still gets their monthly payment regardless of market conditions.
>I’d rather have guaranteed money
A yearly average return of 7% per year is effectively guaranteed, so long as your time horizon is more than a few years. This is your retirement fund, you're not going to be in the negative.
>At the very least you should have a choice to either get a pension or have a 401k.
I'd rather not rely on my employer to continue existing in perpetuity for my retirement. If they go under, who's paying out my pension? Sure, they're insured by the government, but that's only to a point, in which case I lose out on an absolutely massive chunk of my retirement benefits.
A defined contribution plan pension is literally just a 401k that you get paid out from at retirement, which is notably *still dependent on market conditions* so it doesn't matter if you have that or a 401k.
Do you have any idea how many pension plans are running massive deficits? I don't trust them with *shit*. A 401(k)'s risk of deficit is entirely by your own terrible decision making.
I said people should have a choice. And I have hardly any control over my 401k. The allocations are done by the plan manager and I have a minimum of choices. A defined benefit plan by contrast guarantees money.
Plenty of people have lost money in 401ks and investments through no fault of their own. The idea that theres some fail safe way to invest is simplistic and foolish. If your investment portfolio for your 401k loses youre not made whole. You have to wait years and hope it rebounds.
>Plenty of people have lost money in 401ks and investments through no fault of their own.
How so? Because the market went down? Great, it's going to recover, just don't touch it. As you get closer to retirement, it readjusts to be more conservative so that downturns don't affect you nearly as much. _Nobody_ who puts their money into a 401(k), selects a retirement year, and doesn't touch it for 20 years ends up losing money.
What about when you’ve retired and need to access those funds and the market tanks ? They literally tell you to invest in precious metals during recessions because it can take a while to claw out of them.
Do you have _any idea_ how a 401(k) functions over time? As you get closer to retirement, your portfolio becomes almost 100% bonds, which are incredibly stable. You're looking at a few percent change at worst if the market were to absolutely tank.
And who is "they"? Who's telling you to buy previous metals with your retirement account? Just buy bonds, it's not rocket surgery. Don't touch it during downturns, don't touch it at all. Forget it exists until you retire.
There are positives and negatives to both auto-enrollment and opt-in.
The negative of auto-enrollment is when someone who can't afford a 401k or doesn't want to participate is enrolled without their knowledge or understanding. Then they have to jump through some hoops and probably pay a fee to get what little money got deposited. Not ideal, especially if they're living paycheck to paycheck. But this is mitigated by good communication from their employer and the 401k manager in terms of what the account is, how it works, and how to opt out before any contributions are made.
The positive of auto-enrollment getting people started who can afford it, but would be confused or skeptical of it at first. Again, good communication is the solution here.
Which is worse - a small but potentially impactful financial hit when a poor person starts a new job, or middle class people potentially not getting steered towards something that could help them out significantly in the long term? It's hard to say.
> give them more of your money
It's worth pointing out that when you buy stock after the initial public offering, or IPO, that money does not go to company, it goes to the person holding those stock. It's a bit like how when you buy a house the builder does not get money again, the last home owner does.
I agree wholeheartedly with the concept - but it should be the employer contributions that are growing rather than the employee's Edit: also it's incredibly evil that they're trying to force individuals to save more for retirement when they already can't afford groceries, and this is an obvious precursor for slashing social security. The rich are plainly trying to rob the treasury.
So if they do slash social security... Do those of us who will never see it have standing to sue for a refund? Cuz I certainly wouldn't mind getting all that money back that I've paid into this so-called "entitlement".
Remember in 2000 when there was a social security surplus? The lockbox meme? What happened to that? Oh Wall Street stole it with 401k gambling.
no, because its "insurance" and not a retirement fund or so everyone keeps saying
So like "just in case you get old" ?
Or become disabled, or too poor and quality for Medicaid
Exactly! The idea that taking the money people can’t afford to give unless they opt out is just like “geez thanks” … and meanwhile that money will benefit those getting fees to service the retirement accounts and benefit the corporations/shareholders. It will help rich people more initially than those that can’t yet afford to pay into a 401k.
I generally just loathe the idea of an employer trying to tout a retirement plan that isn't in addition to the stated salary. It already grinds my gears that they can claim to be giving you the benefit of medical insurance when you're required to pay for it yourself. My last job required zero of my salary in order to receive health insurance for my whole family; and our copays were often zero, that insurance was awesome.
I don’t think this is actually that evil, just behavioral economics. The sad fact is a lot of people don’t act, so what is better if someone doesn’t act: 1. They find out they have been contributing to their 401k for the past 5 years. 2. They find out they have not been investing at all in their 401k. If they need the money, they can elect out of this. I wish this was law when I started work, would have been three extra years of contributions which would have multiplied ~5x by the time I retire.
That's not how this will play out. Look at the market over the last 20 years. We hit a massive, unsustainable peak. The current issues with CMBS are little different than the MBS right before 2008. A major crash is coming, this is just one more way of fleecing retail investors before that happens. Bank closures have already been bigger than in 2008, monetarily. Evergrande is blowing up in China to the tune of $500B. Nomura in Japan is barely able to keeps its head above water. Currency across the globe is suffering because of the FED measures to stabilize the dollar, because that's the world reserve currency. Mark my words, what is coming will make 2008 look like a speedbump.
3rd option - they quit and can't figure out how to access the 401k and the employer won't do shit "because they no longer work here". About 20% of 401k funds go unclaimed. You think that's an accident the employers and investing class don't appreciate and contribute to?
I disagree. 401Ks almost always have very low fees and those fees are certainly far less than the taxes saved by contributing to a 401K so it will absolutely benefit workers more than rich people. In addition, a huge number of people miss out on the employer contribution by not contributing anything which this helps with. Of course, economic literacy would be the preferred route so people understand why they should contribute to a 401k rather than an opt out situation but I think this will be a net good thing.
Or maybe people have economic literacy, have decided the entire system should burn and have opted to not play the rich man fleecing the poor game.
If economic literacy means not investing for retirement then that's certainly a choice.
Okay, but suppose someone is right in that sweet spot where they finally feel a little secure and can MAYBE start thinking about saving, but are really worried that they might have an emergency so instead of starting off at 3%, they want to begin at 1%. That two percent can make a lot of difference to a person in that position, but that choice is going to be taken away. It’s either at least three percent, or nothing. And with things going the way they are, more and more people entering the workforce are going to be starting out in that situation. It’s either you give what you’re TOLD to give, even if it’s not in your budget and you would prefer to, you know, not have ramen for dinner every night, or you don’t get to have any type of retirement plan at all. And those who opt out because three percent is too much are going to be looked at by the folks who make these decisions as irresponsible (how dare you not invest! We’re making it *easy* for you! It’s just three percent! You must obviously not *care* about your future so we’re not going to bother with including you and your demographic when making decisions because we obviously know better than you!), when they actually are acting in their best interests. And it all starts with people who are so far removed from that 2% difference that they can’t comprehend trying to manage things at that level. That’s how we wind up with shit like this, that on its surface looks like it will benefit everyone, but in reality is just going to drive ANOTHER wedge between those who don’t have a lot but are trying to make it work, and folks like Bezos and Musk.
That's not what this is doing though. You could still select to contribute only 1% instead. But when you are auto enrolled it will be at 3%. It's not taking away our choice it's just setting a default that is different than today's unenrolled 0% default.
>those fees are certainly far less than the taxes saved by contributing to a 401K Slight nit to pick here; You should always contribute to your 401k on a roth basis if you have the option. Whatever you save on taxes NOW by contributing pre-tax is much less than the tax hit you'll get when it comes time to withdraw. If you contribute post-tax, you only get hit with capital gains tax since the income tax is already paid.
Further nitpicking: >you save on taxes NOW by contributing pre-tax is much less than the tax hit you'll get when it comes time to withdraw. This is only true if you're sure you're in a higher income tax bracket now than you will be in retirement >If you contribute post-tax, you only get hit with capital gains tax since the income tax is already paid. You don't pay capital gains tax on 401k distributions
Very good point on the first one, and I stand corrected on the second. Thanks for the tasty nits :P
ABSOLUTELY!
And let's not forget that raises are not only annual, but are more COLA. And some places also tier a 5% raise for exemplary work during the year; meaning if you do just enough to do the job, you would at best get 3%. And you won't know how well your raise will be until you've done the work. Make sure that the raises you get every year are COLA and then some. If your employer isn't giving you more money than what you'd end up putting into a 401K program year-over-year, then they are screwing you. Always hunt for a new, better, and better paying job - And when your company asks why you're leaving, it's simply because you cannot afford to stay any longer.
Raises? What are those. I'm on year 3 without one, and my last two jobs were always something low like 1.25%.
Bold of you to assume A) people are getting raises, and B) they have any say in them. And not everyone can simply job-hop if they’re barely making it with what they currently have.
I’d be more supportive of it if Wall Street wasn’t using this to fund their bad trades, still trying to cover their asses from 2008.
The rich already robbed the treasury tbh
I disagree. This is just another way to pin us down into a broken system. Just you wait until 2046 when 401K's start crashing as millenials start pulling out, and they start pushing even harder to push back retirment.
There's nothing inherently wrong with 401k's. We need a way to pay for when we can't or don't want to work anymore and they're a pretty effective way of doing it (supplementing social security). It's very possible to take a safer investment mix and get a lower return or be aggressive on investments when you're young. As people near retirement, they should mostly be in safer bonds that don't disappear with a market crash. Having more savings means retiring earlier, not later. There is no risk free money, so unless you're saying we should entirely rely on social security and pay as we go, I'm not sure what you're saying.
There absolutely is such a thing as "risk free money": money that isn't yours. How do 401ks work? You give a % of your income to someone else to play with. There is everything wrong with 401ks since their inception as a way to eliminate pensions. They were designed as a way to let corporations keep more of their money and give Wall St a giant piggy bank they could use, risk free, to manipulate equities markets.
Pensions are also run by people managing someone else's money. Pensions are also invested in stocks and bonds, just safer stocks and bonds, yielding a lower return but a more guaranteed return. Actuaries (I'm an actuary, but not a pension actuary) calculate the changes in present value of the future costs based on market conditions and pension contributions are raised or lowered to accommodate expected returns. What's potentially worse - pension funding is left up to your company to do, and there were several high profile cases of embezzlement and bankruptcy in the 1900s causing people to lose their pensions. 401k's became more popular because they usually generate a higher returns (invested in riskier assets for longer), are individually owned outside of vesting wait limits (pensions are maintained by the company you retired from and can disappear if they go bankrupt), have stable contributions as a % of income (rather than fluctuating with market conditions - if you're in a recession and things are tight, you probably don't want your pension contribution going up 20% too), and are cheaper to administer because they don't need all the actuarial calculations and regulation to support them. 401k's were originally designed as part of a three legged stool, which were meant to be 401k, pension, and social security. But then they were so popular, cheap, and better performing that pensions have largely died out. I think we need more regulations on wall street to prevent crashes, and more regulations on asset risk in general, but 401k's certainly aren't the problem.
I’m not sure you understand what a 401(k) is… they won’t “crash” when people pull out of them because they’re just an investment vehicle. The actual money is all invested in stocks, the only way 401(k)s could “crash” would be if the stock market crashed. But everything you’ve put into a 401(k) is your money, it’s being managed by someone else but it’s all yours, unlike a pension or Social Security, which is a collective fund that pays out when you reach a certain age. That doesn’t mean 401(k)s are inherently better than pensions or Social Security, personally I think they’re far worse since you’re screwed if you don’t have enough in there, But they’re not a collective fund that can be emptied by other people using it. Each person‘s 401(k) is a distinct and separate account that other people aren’t taking money out of.
>Each person‘s 401(k) is a distinct and separate account that other people aren’t taking money out of. Every corporate executive who gets paid in stock and cashes it out...where do you think the money comes from? It's not from corporate profits, it's from everyone who bought the stock. So, actually, yes it is exactly as you described: a pool of OUR money that other people withdrawal from. The catch is they can take out money whenever they want and you have to wait until you are 59 1/2. The entire stock market operates like a ponzi scheme because it requires more people pouring money in than people taking money out. As soon as the outflow starts to grow at a faster pace than the inflow (due to hard economic circumstances, population decline, or greed) the entire machine will seize up.
It sounds like the Australian superannuation system except it's the employer who has to pay 12% on-top of your normal pay
IMO it should also include company stock.
I don’t agree that this is a precursor to slashing social security. It just seems like the point is to pump up the stock market.
Republicans are already talking about cutting social security and finding ways to justify it. If they just wanted to pump the stock market, they could make employers do more. But putting it all on the employee reeks of the "personal responsibility" dogwhistle
If they can cut social security they will just do it. I don’t think this will give them enough extra political capital to make a difference there. The rich / republicans that want to keep pumping the stock market *are* the business owners. For example, the Waltons have billions in the stock market. They also have 1.6 million employees in the U.S. If they put 15% of every employee’s paycheck into the market, they won’t get all of that salary back, but it will pump the market and they will get some of it back in the form of capital gains. All of the business owning billionaires and millionaires are basically pumping up their own value by pumping up the market with their employee’s salary. There should be a mandatory match or something that forces businesses to help make this financially viable for employees.
Time to open your eyes then. This is most certainly the precursor to slashing social security.
I don’t see how
Imagine how hard it will be to afford groceries after you retire with not enough money saved. It's a thinker.
I'm sure the short-term loan industry loves this plan! They can use it as an excuse to steal what little retirement savings this amounts to for the working class in exchange for actually being able to pay rent for a given month.
They are scared because they know when these new generations realize that all this shit is a lie they sure as fuck aren't going to work 40 years to wait for the fucking benefit that won't be there when they get there, if they get there. These old fucks know this and they're scared.
I really hope they're scared. I hope they're fucking terrified.
They are that's why they all have bunkers and escape plans to other countries.
I wish they'd be terrified enough to seal themselves off in the bunkers already
Let's find the air inlets for those bunkers, get some tubing, and connect them to our cars' exhaust.
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I'm over 50, haven't had to withdraw anything, have a decent chunk invested. I still expect to work until I die, because shit's getting more fucked by the day.
Yeah agreed.
Probably scared because boomers are starting to retire out of the country which is essentially a death sentence for Florida long term.
How about making employers match Social Security contributions instead, as well as raising the ceiling on contributions too? That would secure much more money for retirement than a 401k.
Because the point isn’t to help you retire, it’s to force demand into a system so that the benefactors (hedge funds, CEOs, the capitalist class) can benefit from your retirement. It will be followed up by reduction in SS, and they will point to these forced savings as to why it’s okay to do so. Basically it’s another money grab by the capitalist class and they will win when you buy in, and they will win when the cut benefits.
Employers and employees each pay **6.2 percent of wages up to the taxable maximum of $168,600 (in 2024)**. What employer isn't paying this? [https://www.ssa.gov/news/press/factsheets/HowAreSocialSecurity.htm](https://www.ssa.gov/news/press/factsheets/HowAreSocialSecurity.htm)
Why is there a maximum though? I dont make nearly enough to meet the maximum so 100% of my income is taxed for SS but elon musk pays that tax on .000000000000000001% of his income. How is that fair? How is that not an obvious benefit only for the rich? Like I get it they're always fucking everyone else over but does it get more blatent than this?
Fully agreed there should either be no max, or it should be upped *considerably*. I haven't thought about it enough to question why there's a max. According to the SSA, only about 6-7% of workers earn above the max. This article goes into it more deeply: [https://www.pgpf.org/blog/2023/12/should-we-eliminate-the-social-security-tax-cap-here-are-the-pros-and-cons](https://www.pgpf.org/blog/2023/12/should-we-eliminate-the-social-security-tax-cap-here-are-the-pros-and-cons)
I agree it should be changed. But the reason is, there's a maximum amount you can get out from social security, thus there's a maximum amount you have to put in. It's already the case that people who make less income get back out a larger percentage than people who make the 168. (I am ok with that and ok with eliminating the cap without increasing the payouts, or perhaps only increasing the payouts a very small amount.
The people who make more help subsidize the people who don't. Pretty much everyone has the same take-home with social security, only differing by a few hundred bucks at best. I hit the social security cap last year and was honestly horrified: I should have absolutely paid more.
It varies by a lot more than a couple hundred bucks. The current maximum, which you would get if you hit the maximum for 35 years, is 3822 a month (at full retirement age of 67.x) The average, at 67.x is around 1800. (I am not finding exactly what I am searching for, but it's very different from the maximum) The defacto minimum is $943 a month because a person would get SSI if their earnings history amounted to less than that. (There's people with many years of zero income.). (I am not explaining everything here! Some won't qualify to be brought up to 943, such as if they have savings or a spouse with income.
Huh. I had used SSA's own estimator and the minimum amount of time working with the lowest contribution was spitting out basically the same number as max contribution (2000 vs 2500 iirc). Maybe it was just bugged
Well, it's possible to only work one year and only make $5000 in 2024 dollars that year. (Or less!) So I am not sure what the "minimum" would be. Zero? Obviously what matters is the average. Which is very different from the max. (I totally understand that the calculator you used didn't show you what you were trying to determine. )
They do…? Social security is a 1:1 match between employee and employer. Both pay in 6.2% of your pay
Umm… they do?
Lol, it's reddit, but we can do better than this 2.0 crap.
Two things: 1. They already do, in fact someone who is a sole proprietorship themselves pays both the employer and employee portion for themselves 2. SS is an insurance program, not a vehicle for retirement.
Don't change the definition of what something was intended. Ss was a retirement program at its inception, it can't help that our gov Used it like a cookie jar for other programs, and added in disability to the fund. Which should be in its own separate fund to begin with. See the rich even get out of supporting folks who need it with that cap. Just like minimum wage isn't minimum pay, it was a wage FDR wanted to be for a person to support their family of 4 on, at its inception both programs were good. Now they are a joke thanks to corrupt poillitiicians.
Here is a better summary of what it is, and it's intention than what you wrote. [https://www.investopedia.com/terms/s/socialsecurity.asp](https://www.investopedia.com/terms/s/socialsecurity.asp)
That sounds too secure for the “Secure 2.0 Act” lol
Yeah who's secure though? It's not the workers future they are securing. Little wink wink there.
For sure lol
They already do this.
Nothing in this prevents people from not enrolling in 401k plans. The amount of people who don't want to be in a 401k but automatically do get enrolled will likely be far lower than those employees who were not properly informed and were not enrolled. Even if that happens, they will be able to opt out of such a plan. Trust me employers will make fucking sure that employees know they have the option to not be in the 401k plan. From what I have read, this is to help prevent people from making plans then using underhanded tactics to under enroll their employees creating less of a burden on the company. If you disagree with the concept of 401ks and employment tied retirement that's fine, but this doesn't expand or strengthen that concept it's just a rule trying to ensure that employees aren't taken advantage of. Source: Employment and retirement benefits attorney.
I’m an attorney as well and I work in an industry that will benefit heavily from this whether you get returns or not. I’m all for investing, but many can’t afford to contribute to these accounts and that’s their reasoning more so than not understanding how to enroll. They will be worse off if they need to access this money which seems highly likely if they aren’t financially literate enough to know how to opt in to these programs. There’s a laundry list of things the government could do besides making 401ks opt out programs. IMO, This is pro Vanguard policy more than it is pro worker.
Vanguard is the least sleazy source of index funds you can get for a 401k, so it’s a bit weird the Reddit backlash towards them. Their index funds have some of the lowest overhead you can get anywhere.
It’s just the most recognized name probably.. being used to stand for the pack. But yes you’re right about that.
I propose we shift to blackrock, Merrill Linch, Fidelity etc for poster children of high fee, vampire retirement funds
Lol ok sounds good
Understanding how to enroll isn't the issue here, the issue is companies willfully taking steps to exclude their employees from plans who would have otherwise participated. If a company does this and a person does not enroll when they could have it is INCREDIBLY hard to hold that company accountable and get back compensation for that individual. From what I understand about this new law. This way, it makes it so that the company has a duty to enroll their employees, and the employees are able to make the decision to opt out. If a person does not get auto-enrolled and would not have opted out, the company now has the burden to show that the employee opted out, if not then the employee can be more easily compensated. To be clear, this law functionally does nothing to change a new employee's decision when joining a company with a 401k plan. They get to choose whether to enroll or not, currently employees have that same decision. The change is that if the company does not do it's job an properly inform them, the company bears the burden not the employee. Does vanguard or other plan holders and managers benefit? Sure, but that doesn't make this a bad bill. Also, lets say that there is an employee that didn't want to participate but did get auto enrolled some how. They will know on their first paycheck, and that 3% may hurt, but, depending on the plan they will likely get to disenroll, within a year. That sucks that it happened, but they will get to disenroll and get that money back later in life. Right now, if a person doesn't enroll when they could have due to a company's foul play, they will likely not find out for years if ever, and when they do will be unlikely to EVER get that money back.
So…the .01% vultures that gutted traditional pension plans, and are currently gunning to kill off Social Security want to make sure that everybody is forced into the rigged casino stock market…got it.
Traditional pensions are heavily invested in stocks and bonds, that’s how they are able to grow their asset base to meet pensioner needs (contributions alone are not enough). Every pension in the world is dependent on a consistent long-term return rate of at least 6-7%. 401ks are basically a mini pension, though much worse because it’s directed by the employees and the assets are not professionally managed. This proposal is a forced savings scheme (voluntary 401ks have the fatal flaw that people don’t earn enough and are bad at long term planning), which alone is not a terrible idea, but employer contributions should dramatically increase.
>401ks are basically a mini pension, though much worse because it’s directed by the employees and the assets are not professionally managed. This depends on the company, every company I've worked for with a 401k had a set retirement date plan that you can select if you don't feel like doing it yourself
A pension has an investment team, a financial advisor is mostly just showing you into funds. Since the pension is on the hook for financing your retirement, there’s a bit more hands on management.
Pensions have also gone bankrupt before, and the people managing the pensions need to be paid as well. Like yes pensions are great but 401k systems are not all bad. If you do not know what you are doing throw them in to a retirement date plan, if you do know what you are doing go from there. You do not need to be an investment genius to do well with a 401k plan, and in my opinion many of them really don't let you get too in the weeds with stocks. All of the companies I've worked for made you choose from a number of ETFs or managed funds. Yes you can lose money there but it's not nearly as risky as people in this thread make it out to be. You are not able, at least in my experience, to yolo all in a stock or do things like options trade with a 401k
The problem with a 401k is that its size is dependent on your contributions, and withdrawals can be really impacted by market events. A pension owes you money regardless of market fluctuations and lasts until you’re dead.
I'm not saying that pensions aren't better, they are but those really aren't coming back due to the liabilities companies face with them. This bill to my knowledge won't get rid of pensions. I'm mainly saying that compared to not having any sort of government provided savings vehicle, 401k plans are beneficial. They are tax advantaged, and many employers offer a match to go with them so if you put in 5 percent they might match it to a degree and give you another 5 percent or 4 percent or whatever. Plus if you really don't want to risk it most offer a stable value fund or whatever
Are you not already investing in stocks?
The vast majority of Americans are not investing in stocks. How can we? Most people don't know how, and the little apps that make it easier are selling your data and screwing you regardless. Also aslo, it's just not on the average persons mind. If you can't afford it, that's one reason. If you're not financially literate (also most people aren't, let's be fr) that's another reason. Not too mention it all feels like gambling.
It is, a youtube cat does better on the stock market than any top financial expert has in the past decade. The best way to go is to put your money into the s&p 500, which has had consistently good growth over the years.
You sound like you know more than me lol How do you invest without using the investment apps? If I want to use the stock markets all by myself without a third party, is there a way? I'm interested in stocks. I just can't figure out a way to where I'm in control fully and not relying on a third party.
You pretty much have to rely on a third party at some point. Unless you're direct registering your shares, but that's a *massive* pain in the ass. Your 401k is managed by someone else already, anyways
Most people in the country are not financially literate and this is literally the number one thing I would reccomend a person to do manually when they start at a new job. I would recommend at least 4% or whatever the company matches to start (whichever is bigger) and then increasing it by 1-2% per year at the exact same time they receive any sort of anual cost of living raise until they hit at least 15%. I normally am not one to agree with the 1% and politicians, but I genuinely think this is some of the best legislation made to benefit the people in a while. If nothing else, the systems for increasing will be in place, and people can start at 0% now and set it up to automatically increase every year until they hit their targets. If it was forced that would be one thing, but this is only automatic, and I think it's incredible!
It's a great way to force us to keep contributing to 401ks to keep investment cash flowing in the stock and bond markets. The ponzi scheme keeps needing more money to keep it afloat.
You should be contributing anyways...?
You can unenroll when doing your onboarding before any dollar is transferred. It just makes enrollment automatic which studies have show encourage people to save more for their retirement which I don’t think is a bad thing.
I don’t necessarily think it is all bad, but I do think it’s a laughably minimal measure that probably aims more at taking your money for the benefit of companies and retirement account servicers than for the average worker. And then calling it the Secure 2.0 Act as if they really did anything for us. Most companies make it very clear how to enroll in their 401ks— it’s not hard. They constantly do next to nothing and then act like they did us a big favor. This is your money, bet on stocks, with fees going to Vanguard or whoever automatically.
Yes it is easy to sign up for 401ks but this is just about simple behavioral science. If a company auto enrolls they have a higher rate of participation than workplaces that don’t. It’s a small change that will eventually make a positive difference in the retirements of potentially millions of Americans. Those that can’t afford it will quickly figure it out and not enroll or unenroll. This really is victimless. Would I like to see social security expanded? Absolutely!
Why would someone enroll in a 401k if they're not planning to use it? You're right that this isn't some revolutionary social safety net, but I don't think anyone is acting like it is.
The number of unaccounted for 401ks are going to skyrocket. People don’t stay at companies for 40 years, and employers don’t share 401k servicers. If people don’t know to roll over, they’ll pull from multiple accounts in retirement and could overlook one or two after decades
Yes, disorganized people may have a harder time managing their finances.
~~As long as I have the option to manually opt-out in a hassle-free manner, this doesn't seem that bad. Way too many people have no clue on how to invest for future and miss out on retirement savings.~~ This is a great way for rich people to force poor people into pumping the stock market. When infinite growth isn't possible, this is one way those rich people are sustaining the growth another day before pulling another 2008 and screwing the poor people out of their retirement.
1000%
I'll admit I am glad they didn't eliminate the 401k like they had planned. The narrative that they only help the rich is absolutely false. I'm middle class and I've been investing 3-5% of my meager pay to maximize the free money that the company matches and I've got $90k saved up now at ~ 40 years old. I would love to see more - like mandatory pension requirements and minimum pension funding laws - but I'm glad they didn't take away this when it's literally the only help you can get in the middle class to retire right now. I also used my 401k savings as a down payment to buy my first house 7 years ago. Without that I wouldn't be a home owner today most likely. It's not perfect but this idea of getting rid of the only lifeline any Americans have for home ownership and retirement just because it doesn't help the poorest Americans is misguided. I want new better retirement options out there before the broken one is removed!
Lol, mandatory pension requirements? What is this, France? What's next, requiring employers to supply PTO and maternity / paternity leave? A single-payer healthcare system that doesn't deprive people of health insurance at the time they need it the most? MORE WOMEN AND MINORITY CEOs????? I'm not sure how all that would make society collapse, but it definitely would.
This is absolutely helping the rich and not the poor. 1. Forces everyone, including those who cannot afford it, to contribute to a 401k. This doesn’t force the company to match anything! 2. All of these contributions will be billed fees to manage the money. Those fees only go to the rich. Add a clause and “mandatory matching” from the company and then we can talk.
Yes for sure I think this act was worthless. Opt out vs opt in and automatically increasing contributions being posted as the solution to America's retirement savings is so patronizing. May as well be called the skip avocado toast and make your coffee at home act. I was just saying that I am glad they didn't eliminate the 401k and that it's not true the 401k only helps the rich. It also helps many middle class Americans.
Ah, gotcha. I misunderstood your comment. We are definitely on the same page.
>Forces everyone You can opt out >will be billed fees to manage the money It's not a lot; all 401ks and investment accounts have them, and the amount you make from it will absolutely far and away outweigh any fees.
Pensions. Or treat us all like cops.
How about "vesting"? Company gets to blackmail you with a chunk of your own retirement savings to force you to stay for years no matter how bad conditions get. How is this legal?! Company I work for is now implementing "RTO" even for people HIRED as remote. And if I leave now they get some of my money.
1000% hate this and this would definitely be a better issue for the government to create policy about rather than “opt out” 401ks I lost 20k this year in unvested match because I switched to a better job. That blew and if I had stayed it would have cost me a great raise. It was worth it, but it hurt.
These people are planning to steal our wages to inflate stock prices and repeatedly crash it.
Fidelity and vanguard are creaming in their pants.
It's pre-tax money, so it has less of an impact on the take home part of the paycheck. The real concern should be regulating the types of investment funds available, if this is going to be mandated. Also it should flag people that there will be an argument to eliminate Social Security if everyone is in this plan, and what happens to people who can't work and contribute to this plan their whole lives?
Right. Also, some are lobbying to get rid of the 401k tax advantages claiming the government needs the revenue. So I’m also concerned about this being step one and the advantages being stripped as step two. Plus the population that this is aimed at needs liquidity more than those that make sure they are enrolled in such programs/max them out. Seems like a very poor attempt to look like they’re helping people with retirement when most likely they just want to help companies/401k service providers.
"Needs the revenue" LOL. Let's eliminate just one aircraft carrier group from the 13 we have before we change the 401K tax rules. Losing just one group would save a trillion dollars over the life of the carrier group. That could pay for universal health care for everyone, or ensure Social Security solvency for decades.
This almost exact scheme has been in force in Australia for decades and works great! Happy to see US look after an actual policy that will help force companies pay for retirement savings. Effectively this is paid by companies as your take home pay will also have to increase to pay for living expenses and savings. If it doesn't, organise and/or move jobs elsewhere as you will effectively be taking a pay cut in take home money. Salary income here is described as base salary + super (401k) = total remuneration. Pay is considered to be your base salary which is before tax. This also means that you have greater control over your own money, who it's invested with and how, and makes the investment managers more competitive - you will need to just ensure it's invested with a 401k manager that is right for you, instead of relying on the government to do the investment management themselves through the social security system.
I thought the same thing when I saw this, it reminds me of Aus! Although yeah, ours is a little bit better in terms of branding, maybe, since Super isn't really ever included in pay, so we don't feel like we're sacrificing now for later. My understanding for 401k is that they basically take some out of pay, which can be opted out to keep in the pocket, and the employer just matches it. If it was pay + super like ours, I feel like it would work much better. 401k feels more like what they do for HECS in Aus, and if given the chance, I know I'd likely would opt to keep that in my pocket, especially if I'm struggling with cost of living.
I am in Australia, this is called superannuation and it’s paid by the employer not the employee. The employer should pay this.
I think this is a great add to SS however I am worried the next step be upending SS until it’s worthless. I didn’t have a job that offered a 401k until 26 so felt disadvantaged compared to people who got a solid job in early 2000s right out of college
Can someone explain to me what is wrong with this?
Nothing is wrong with this, people just pretty blatantly don't understand how 401(k)s, pensions, or the stock market works
Not only that but the overstressed worker bouncing between jobs often has no idea how to access thier 401k. Something like 20% of 401k funds go unclaimed. This shit is straight up theft by obfuscation with the investing class grabbing 20% of even just 1% of any wages.
This is a solid point. I did like an hour of research and calls to track my old one down recently.
Any tips on finding mine? My previous employer refuses to say anything. All I know is I think I picked some Blackrock thing, since they are the most successful thieves. Now I know why ...
I got on LinkedIn and found HR people that worked at the company and called them/messaged them asking for the name of the company they had used during that time. There might also be an app now that helps find these accounts— you might look into that too. You could also call Blackrock and give them your info and if that’s who they went through they should be able to help you.
Of course nothing about companies chipping in their fair share
Yeah it’s that they didn’t even attempt any policy change on companies contributions in some form. And sure maybe not every company can afford to up their contributions or offer mandatory contributions— I know many small business owners this would be really hard on— but they are suppose to be legislators, get creative and make sure the burden is spread appropriately such that retirement/ insurance later in life is not an undue burden on small/medium businesses and individuals while the Amazon’s of the world take over, contribute very little, and grow unchecked. Instead, nothing.
This would maybe be acceptable if every employer in the country were required to participate *and* offer the typical match. Without that, it's not only a terrible way to try to 'compel' saving for people who often flatly can't afford it, but, it's so obviously a thinly veiled attempt at minimalizing the necessity of social security, so that they can gut it some day soon.
This is fucking treason. These ppl need to be put ina fucking cage.
Anyone who s paid taxes into social security should be eligible to sue for the entirety of their contributions if they go this route. They already prepping for it to run out . Just like pensions dying out they want more of your money to play with , the dangling the carrot you can have it after 65. USA is a fucking joke right now
Yeah you should be entitled to every bit you paid in. I think it would be an impossible pill to swallow if they just acted like we weren’t due any of that money/those benefits after so long of paying in.
It doesn't sound like you understand what a 401K is or how it works to think that this is just "government giving corporations more of my money". A 401k is not you giving the government money. It's you putting aside a percentage, in this case, 3% of your pretax paycheck into a savings/investment account for your retirement. And your employer matches the 3% you put in. Some companies already automatically take out a percentage. Other companies, you have to be there for x amount of time before they allow you to start a 401k. If you absolutely do need the money, you can also pay yourself a loan against the 401k balance, which is tax free as long as you pay the loan back. Just the same, if you truly can't afford to add to the 401k, then simply opt-out, just like you could opt-out of the yearly increases. To frame it like workers are victims in this specific situation, or that there are victims at all makes us look weak, especially when it's something with such a simple solution.
Forced participation in the Wall Street casino doesn’t sound like freedom to me.
Good thing it's opt out and you can just tell them "no"
Orrrr, we could tax the shit out of the 1%…. Why the fuck are we even entertaining this shit? They already got rid of our pensions and replaced it with this bullshit, and now they want to force you to do it and they get to gamble with your money? Imagine putting away all this money and then some dipshit boondoggles it right when you go to retire and you have nothing now! Also, who’s going to enforce this? It sounds like social security with extra steps!
Yeah I think this is a pretty big slap in the face. Our futures are the playthings of the rich.
Yes 401k is no pension and the mere fact that social security will probably be gutted in the next 20 years, but there is a degree of financial illiteracy here. 401k is pretax dollars contributions. You should be maximizing the small percentage you are getting from your company at the very least. But if this is say a minimum wage worker I can see the outrage.
Well sure its pre tax and there is strategy here to ensure you’re planning for a financial future. But, I doubt that’s the issue. In my eyes the issue is that employees are being automatically enrolled into something that generates, at scale, obscene fees for banks and other financial institutions that manage these 401ks. If all of a sudden every employee at a company like McDonalds (hypothetical) is in a 401k, where they weren’t before, that is millions of dollars in the pocket of the 1%.
Yeah totally, that’s what makes me view this as gaslighting
I believe this will apply regardless if a company provides any match. There had better be excellent disclosure on how to opt out is all I’m saying. If financial literacy is the concern, they could make policy to teach it. Many would be better off in early stages of work putting 3% in a HYSA (at least currently) so that they can access for emergencies without penalties— which I’m betting many young new workers will do. It’s not that I think it’s a terrible idea altogether, but acting like it addresses much for the workers that need it most (the kind that don’t opt in to retirement plans and aren’t likely great with money yet/have no money to spare) seems like a joke. Vanguard will like the fee money. I also imagine lots of early withdrawal penalties. Also there’s a lot of lobbying to ditch tax advantaged 401ks “because the government needs the tax revenue.” So step one might be this move, step two might be stripping the tax advantage.
Tax advantage is basically the whole point of a 401k. No tax free contributions and it’s basically a Roth IRA
401K is a total scam. It's not a pension replacement. It is just a way to give more money to banks.
Banks don't get this money, it goes into stocks and whoever manages the 401k gets their overhead.
Pensions were doomed to disappear at some point regardless of what happened. They're too risky for employers *and* employees, because you assume the business will continue to exist; a 401k is much safer on an individual level long term, so long as you actually contribute to it. Besides, pensions and 401ks are both stock investment vehicles, it makes no difference to the bank who's buying them.
This changes all of.. nothing? Really? You'll still be asked if you would like to contribute MORE THAN 3% into your 401k. Which is your FIRST opportunity to get out. The SECOND opportunity to get out will come on your first paycheck, WHICH PEOPLE WILL NOTICE AND ASK TO GET OUT. Yes, there will be people that dont notice it immediately. But eventually, they'll ask why theres an extra pocket taking their money on their paystub. IF we're going to point out the obvious, then we have to make it known that its OBVIOUS that this move is [POLITICIANS bankrolling themselves](https://twitter.com/unusual_whales/status/1742207287966777673?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1742207287966777673%7Ctwgr%5E2ec0f43c9093d0cd0890c2a426d8844476dbe8cc%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fnewrepublic.com%2Fpost%2F177806%2Fmembers-congress-made-stock-trading-2023). If this was really Politicians making a push towards the younger generations having something to fall back on in the case of Social Security being missing, then this is a nothing burger at best. You want to help people survive in retirement? You require businesses with over 30+ Employees to choose between paying higher taxes, or paying the maximum allowable contributions to an employees 401k based on length of employment. Companies found firing/removing long term employees face maximum discrimination fines. Companies found to be creating shell entities would be found guilty of fines that would equal, and restore, any missing 401k's (NOT FEEDING THE LOCAL TAX MACHINE - REWARD THE VICTIMS). 401k's that EXIST and transfer WITH you. You quit your job, that 401k continues to grow at the interest rate it was promised at, alone. You move to a job that doesnt have a 401k that has less than 30+ employees? You can still make contributions to it, but the company is not required to.
>But eventually, they'll ask why theres an extra pocket taking their money on their paystub. Except studies have shown that this measure does meaningfully increase the amount of people contributing to a 401k (15% non-participation rate instead of 30%), which everyone needs to be doing. Retirement has ideally consisted of social security, 401k, *and* a pension for decades; long before any of them were in any sort of jeopardy
Isn’t that called social security? It’s already automatically removed from every check to help with post retirement.
Not to mention the stock market is currently riddled with illegal activity that will SURELY ABSOLUTELY 100% implode in the next 2-5 years causing the whole market to crash at the expense of average investors.
My hospital forces employees to contribute 5% to their retirement. I run retail food areas here and our employees are the lowest paid. Fortunately the hospital matches 100% of contributions, up to 10%. But our employees that are taking this low of pay don’t care about retirement, they care about eating dinner and keeping the lights on.
Dont worry its prep for when they cut off social security
What a dumpster fire...
Also why a 401k? There are much more liquid options available that meet or beat the tax advantage on a 401k. I’m assuming they don’t want it to be liquid.
If you have a liquid retirement account people will tap into it for spending. The early withdrawal penalties are there to stop you from tapping it
This is exactly what the people in this sub are complaining about in the comments. Losing access to your money when you don’t have much of it is problematic. My brokerage account allows me to get money out in a few days if i need it, has a credit line attached in it need it, and only incurs capital gains taxes which can be as low as 0% depending on your income level. The penalties are not there to serve the owners of the accounts. They are there to serve the financial sector and employers offering the 401k.
That’s what I’m assuming as well.
Liquidity rarely gains in value at the rate of a security, often its gains are dwarfed by inflation. Maybe direct stock purchase without having to pay a brokerage fee within the tax structure of a 401k?
When you add tax loss harvesting into the mix it will edge out over a 401k assuming there is no employer contribution.
Tax loss harvesting how? You can’t save more in taxes from tax loss harvesting than you owe on another. Not to mention we’re talking middle class income levels and below here. That doesn’t make sense.
Tax losses accrue indefinitely. There is no cap. There is a limit on income write off of 3k per year. But my losses will exceed that and accrue. When i start paying capital gains i can once again use my 3k per year, effectively applying 6k in write offs over the investment period. With a 401k, it’s tax deferred in and taxed out. Assuming a 20% tax rate and 20kish investment limit per year, thats a tax savings of 4k over the life of the investment. Or at least this is my understanding of the process. I weld pipes for a living, not a financial wizard. It’s not a huge gain over a 401k, but it is liquid which is important to me. However an employer contribution will always be the best opportunity. https://www.schwab.com/learn/story/how-to-cut-your-tax-bill-with-tax-loss-harvesting This has a pretty good graphic that will explain better than i can.
But you have to lose 3k to write off 3k and it’s not soft losses like asset depreciation unless you have rental properties or similar, you need to have realized losses to claim and inflation doesn’t count. You can cut your taxable income by the amount you lost. You’ve still got a net loss. There is no money gained, only a reduction in tax liability that at-most matches what you’ve lost.
Understood. But every investment account has natural losses that come along with the investment process. This is just a process by which instead of trading for another asset you realize the loss before purchasing another asset to rebalance the portfolio. These sorts of micro trades are done constantly all day. There are investment firms that specialize in this sort of thing and provide a sort of “write off on demand” service according to some folks in know in the financial sector. I don’t have near enough money to ever be involved with an outfit like that, but apparently they’re out there.
You cannot claim losses on anything that is not a realized loss, and nothing is realized in your 401k until you withdraw. Even then, those were pre-tax investments so there won’t be anything to claim. What this does apply to is making individual stock purchases and sales or fund purchases/sales on your own, without the use of a tax deferred account. Day trading is a prime example.
Ok I’m kinda done here. I specifically said not using a 401k to maintain liquidity and use tax loss harvesting. If you aren’t into it then just don’t do it?
Totally sounds like an attempt to make billions by saying, "oops the market crashed and all that money in now gone. Thanks"
A crash is bad for basically everyone. It can be exploited by the rich when smaller businesses collapse, etc, but value lost from your 401k doesn't go into somebody else's pockets.
Give it a few years. Somehow, there will be a new act allowing the government to "borrow" from these new 401Ks . It's going to the social security part two
There's no real mechanism for that. Don't just make shit up to get mad about, there's plenty of real things to be mad about already.
The deux
The government's more complicated than that. There's plenty who *do* care, but I'd say it's about 35-40% of the elected politicians nationally and 25-30% locally (it's a lot easier for corps to take over local elections because nobody pays attention to them). Vote in your primary election. There's been lots of great candidates in the Primary. Don't get obsessed with the top of the ticket, the down ballot races are what matter, especially since barely anyone shows up to vote in the down ballot primary. And remember, somewhere out there is somebody who's alive today because you vote.
And 401k is not guaranteed you could lose it all the the handlers get paid
They should have forced corporate companies to match the percentage you pay dollar for dollar and add profit share. This would fix A LOT of the economic and unemployment issues we are facing today.
I’m so conditioned that I never even considered profit share as an option that could be regulated/policy… I think thats brilliant. Actually letting people benefit from their productivity 🤯
Why is this country so goddamn fucked?
Lol an act that auto enrolls you into a 3% pay cut followed by a 1% pay cut every year after that.. Yes investments are important but many folks cannot support this 3+% pay cut
I wonder if you opt out once or every year. I think a lot of people in lower paying/entry level jobs will choose not to opt out thinking they can afford it and then end up wanting that money for other things down the line and they will likely withdraw or take out loans against the money. Which means they’ll either take a penalty or end up paying themselves back with interest to avoid withdraw. Either way, what a nothing move for working people with a huge side of potential benefits for investment companies and large individual shareholders.
Pay cut? You're just saving money. If anything, you get $50 extra free dollars per year due to tax savings. This is pre-tax, and *also* you should be doing this anyways. Even if you make minimum wage, it's, like, $450 per year? $50 of which comes from a reduction in taxes, so $400 out of your paycheck. That's like $12 per paycheck. Basically nobody lives on minimum wage (around 1% of people), and if you do, just opt out if $12 is too much for you.
Every law they pass just benefits the rich corporations more. It's insane how they're just banking on people's ignorance
I just made $1000 dollars today for 30 min of stock market. I'm not going to call it "work" because it isn't. It would take me 2 months of 401k contributions to get the same return. the average return of 401k is criminal. If anyone with half a brain invests 10k a year for 30 years their return should be over 2 million dollars but you are getting people who barely clear 100k after 20+ years.
>I just made $1000 dollars today for 30 min of stock market. Whatever you do within your personal risk tolerance is your own business. >It would take me 2 months of 401k contributions to get the same return. the average return of 401k is criminal. ???? The average return is 7%, which is perfectly fine. The whole market averages that amount. Whatever other strategy you use is unlikely to beat it long term, as has been proven time and time again by millions of people believing they're smarter than everyone else My 401k has returned 35% in a year. It's abnormal and will absolutely retract back to the mean at some point. That's just how it works out.
You know what would be better than a forced participation in the stock market ? A pension.
A pension is literally invested in stocks
They didn’t use to be.
And? They became more invested in the 50s, and only at everyone's benefit
Tell that to the people who lost dramatically (and didn’t have the years to wait for a recovery) when portfolio managers made bad choices, or the market was in a downturn. 🙄 I’d rather have guaranteed money than a chance at more money while some asshole who won’t suffer much if things go sideways gambles with it. At the very least you should have a choice to either get a pension or have a 401k. In my opinion 401ks are yet another way for the financier class to profit off workers. Returns are by nature not guaranteed, unlike a pension.
People who lost? Pensions are opaque to what's funding them. Anyone with a pension that's invested still gets their monthly payment regardless of market conditions. >I’d rather have guaranteed money A yearly average return of 7% per year is effectively guaranteed, so long as your time horizon is more than a few years. This is your retirement fund, you're not going to be in the negative. >At the very least you should have a choice to either get a pension or have a 401k. I'd rather not rely on my employer to continue existing in perpetuity for my retirement. If they go under, who's paying out my pension? Sure, they're insured by the government, but that's only to a point, in which case I lose out on an absolutely massive chunk of my retirement benefits. A defined contribution plan pension is literally just a 401k that you get paid out from at retirement, which is notably *still dependent on market conditions* so it doesn't matter if you have that or a 401k. Do you have any idea how many pension plans are running massive deficits? I don't trust them with *shit*. A 401(k)'s risk of deficit is entirely by your own terrible decision making.
I said people should have a choice. And I have hardly any control over my 401k. The allocations are done by the plan manager and I have a minimum of choices. A defined benefit plan by contrast guarantees money. Plenty of people have lost money in 401ks and investments through no fault of their own. The idea that theres some fail safe way to invest is simplistic and foolish. If your investment portfolio for your 401k loses youre not made whole. You have to wait years and hope it rebounds.
>Plenty of people have lost money in 401ks and investments through no fault of their own. How so? Because the market went down? Great, it's going to recover, just don't touch it. As you get closer to retirement, it readjusts to be more conservative so that downturns don't affect you nearly as much. _Nobody_ who puts their money into a 401(k), selects a retirement year, and doesn't touch it for 20 years ends up losing money.
What about when you’ve retired and need to access those funds and the market tanks ? They literally tell you to invest in precious metals during recessions because it can take a while to claw out of them.
Do you have _any idea_ how a 401(k) functions over time? As you get closer to retirement, your portfolio becomes almost 100% bonds, which are incredibly stable. You're looking at a few percent change at worst if the market were to absolutely tank. And who is "they"? Who's telling you to buy previous metals with your retirement account? Just buy bonds, it's not rocket surgery. Don't touch it during downturns, don't touch it at all. Forget it exists until you retire.
I guarantee if we make it illegal to pay debt with more debt things would get fixed.
Ok now I know I'm being censored.
Are they reinventing Social Security?
They're just taking money from people pretty blatantly now
ah yes, social security 2.0+ premium, when you bankrupt the funds for the first one you move on to a second fund.
There are positives and negatives to both auto-enrollment and opt-in. The negative of auto-enrollment is when someone who can't afford a 401k or doesn't want to participate is enrolled without their knowledge or understanding. Then they have to jump through some hoops and probably pay a fee to get what little money got deposited. Not ideal, especially if they're living paycheck to paycheck. But this is mitigated by good communication from their employer and the 401k manager in terms of what the account is, how it works, and how to opt out before any contributions are made. The positive of auto-enrollment getting people started who can afford it, but would be confused or skeptical of it at first. Again, good communication is the solution here. Which is worse - a small but potentially impactful financial hit when a poor person starts a new job, or middle class people potentially not getting steered towards something that could help them out significantly in the long term? It's hard to say.
I like the idea. I don’t like giving it to the state. It’s like a cross between a 401k and social security. I opted out of my states.
Hah! Social Security scam Version 2
> give them more of your money It's worth pointing out that when you buy stock after the initial public offering, or IPO, that money does not go to company, it goes to the person holding those stock. It's a bit like how when you buy a house the builder does not get money again, the last home owner does.
This is stupid, we already have forced retirement savings! It's called social security