Author Topic: 401(k)'s Aren't Working Now, and Never Worked In The First Place  (Read 19591 times)

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2198
  • Location: EastCoast
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #100 on: March 11, 2016, 02:17:08 PM »
Economy-wise, if you want money to circulate the best way to make it do that is to give it to poor people. That way the money gets spent. If you want money to be invested, you give it to Mustachians or to wealthier folks. If you want it to go overseas, you give it to the class of people who have offshore accounts.

I disagree. Yes, the poor will spend it, but they will spend it primarily on things like fast food, overpriced processed food, cheap Made in China products, etc. So the money will mostly be spent at big corporations and will be divided between the executives (the ones with offshore accounts) and the factory owners in the producing countries. All the while the government will come up with ways to extract more money from those who already pay taxes (such as Mustachians) in the name of spreading it around.
On addition to your thinly veiled disparaging of poor people, what exactly are you saying?

That cash transfers that favor the poor stimulate the economy more than giving more to the rich isn't really an opinion, it's a pretty established macroeconomic fact. Of course you run into issues of fairness, but it's no doubt that giving more to people who will spend it (and usually locally at that) is better at stimulating the broader economy than giving it to people who will pile it into equities (especially now with high valuations).

It's not disparaging to point out that the poor, in general, tend to spend their money in the way stated. The poor are not typically spending their money on locally crafted artisan goods or at the farmer's market. Sure some do, but that is the exception. Is this spending still good at a national/global macroeconomic level? Yes. Is it good for the environment or for the health of the poor? Probably not. Is it good for the local economy? I think that depends on the specifics - much of the revenue flowing into the big stores and franchises actually ends up at corporate headquarters.

I'm simply questioning the status quo and suggesting that giving out a bunch of money for people to spend may not be the healthiest thing. We should provide an essential level of minimum support for the poorest, but beyond that just giving away more to spend is like a sugar rush - it feels great in the moment but it's not a good long-term plan. I would rather have people saving and investing. Savings in bank accounts end up back in the economy as a result of fractional reserve banking. Investments in real estate, rentals, businesses, and stocks grow our local economy and create jobs. Even index fund investing means that people are pooling money in equities which increases liquidity and makes it possible to raise large amounts of new capital for startups.
Ah yes. Trickle down economics; working exactly as advertised since 1982..

What do you think is better: $1 being spent at Walmart which results in staff being hired and paid, sales taxes, business taxes to state and fed, property taxes etc.
Or $1 being put to Walmart stock. Which results in... 15% in dividend tax?

Which is better for Walmart?

Poor people buying food for their children is a "quick sugar rush"?

runningthroughFIRE

  • Bristles
  • ***
  • Posts: 333
  • Age: 26
  • Location: Northwest Indiana
  • Ask for broader shoulders.
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #101 on: March 11, 2016, 03:34:21 PM »
Economy-wise, if you want money to circulate the best way to make it do that is to give it to poor people. That way the money gets spent. If you want money to be invested, you give it to Mustachians or to wealthier folks. If you want it to go overseas, you give it to the class of people who have offshore accounts.

I disagree. Yes, the poor will spend it, but they will spend it primarily on things like fast food, overpriced processed food, cheap Made in China products, etc. So the money will mostly be spent at big corporations and will be divided between the executives (the ones with offshore accounts) and the factory owners in the producing countries. All the while the government will come up with ways to extract more money from those who already pay taxes (such as Mustachians) in the name of spreading it around.
On addition to your thinly veiled disparaging of poor people, what exactly are you saying?

That cash transfers that favor the poor stimulate the economy more than giving more to the rich isn't really an opinion, it's a pretty established macroeconomic fact. Of course you run into issues of fairness, but it's no doubt that giving more to people who will spend it (and usually locally at that) is better at stimulating the broader economy than giving it to people who will pile it into equities (especially now with high valuations).

It's not disparaging to point out that the poor, in general, tend to spend their money in the way stated. The poor are not typically spending their money on locally crafted artisan goods or at the farmer's market. Sure some do, but that is the exception. Is this spending still good at a national/global macroeconomic level? Yes. Is it good for the environment or for the health of the poor? Probably not. Is it good for the local economy? I think that depends on the specifics - much of the revenue flowing into the big stores and franchises actually ends up at corporate headquarters.

I'm simply questioning the status quo and suggesting that giving out a bunch of money for people to spend may not be the healthiest thing. We should provide an essential level of minimum support for the poorest, but beyond that just giving away more to spend is like a sugar rush - it feels great in the moment but it's not a good long-term plan. I would rather have people saving and investing. Savings in bank accounts end up back in the economy as a result of fractional reserve banking. Investments in real estate, rentals, businesses, and stocks grow our local economy and create jobs. Even index fund investing means that people are pooling money in equities which increases liquidity and makes it possible to raise large amounts of new capital for startups.
Ah yes. Trickle down economics; working exactly as advertised since 1982..

What do you think is better: $1 being spent at Walmart which results in staff being hired and paid, sales taxes, business taxes to state and fed, property taxes etc.
Or $1 being put to Walmart stock. Which results in... 15% in dividend tax?

Which is better for Walmart?

Poor people buying food for their children is a "quick sugar rush"?
Depends on if you think buying food for their children is "essential".

FINate

  • Handlebar Stache
  • *****
  • Posts: 1322
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #102 on: March 11, 2016, 09:42:05 PM »
Economy-wise, if you want money to circulate the best way to make it do that is to give it to poor people. That way the money gets spent. If you want money to be invested, you give it to Mustachians or to wealthier folks. If you want it to go overseas, you give it to the class of people who have offshore accounts.

I disagree. Yes, the poor will spend it, but they will spend it primarily on things like fast food, overpriced processed food, cheap Made in China products, etc. So the money will mostly be spent at big corporations and will be divided between the executives (the ones with offshore accounts) and the factory owners in the producing countries. All the while the government will come up with ways to extract more money from those who already pay taxes (such as Mustachians) in the name of spreading it around.
On addition to your thinly veiled disparaging of poor people, what exactly are you saying?

That cash transfers that favor the poor stimulate the economy more than giving more to the rich isn't really an opinion, it's a pretty established macroeconomic fact. Of course you run into issues of fairness, but it's no doubt that giving more to people who will spend it (and usually locally at that) is better at stimulating the broader economy than giving it to people who will pile it into equities (especially now with high valuations).

It's not disparaging to point out that the poor, in general, tend to spend their money in the way stated. The poor are not typically spending their money on locally crafted artisan goods or at the farmer's market. Sure some do, but that is the exception. Is this spending still good at a national/global macroeconomic level? Yes. Is it good for the environment or for the health of the poor? Probably not. Is it good for the local economy? I think that depends on the specifics - much of the revenue flowing into the big stores and franchises actually ends up at corporate headquarters.

I'm simply questioning the status quo and suggesting that giving out a bunch of money for people to spend may not be the healthiest thing. We should provide an essential level of minimum support for the poorest, but beyond that just giving away more to spend is like a sugar rush - it feels great in the moment but it's not a good long-term plan. I would rather have people saving and investing. Savings in bank accounts end up back in the economy as a result of fractional reserve banking. Investments in real estate, rentals, businesses, and stocks grow our local economy and create jobs. Even index fund investing means that people are pooling money in equities which increases liquidity and makes it possible to raise large amounts of new capital for startups.
Ah yes. Trickle down economics; working exactly as advertised since 1982..

What do you think is better: $1 being spent at Walmart which results in staff being hired and paid, sales taxes, business taxes to state and fed, property taxes etc.
Or $1 being put to Walmart stock. Which results in... 15% in dividend tax?

Which is better for Walmart?

Poor people buying food for their children is a "quick sugar rush"?
Depends on if you think buying food for their children is "essential".

Thanks for that.

Not that it really needs pointing out, but we have a massive obesity problem in the USA. A strong case can be made that sugary and processed foods play a large role in this. Walmart, Target and the other superstores do sell fresh wholesome foods but that's not how they make their profits and so they promote the processed stuff. It's certainly true that Americans don't buy enough wholesome foods and we overspend on unhealthy crap. In the news just this week - http://www.latimes.com/science/sciencenow/la-sci-sn-ultra-processed-foods-diet-20160309-story.html Also, the poor have higher rates of obesity - http://stateofobesity.org/socioeconomics-obesity/ - there are many reasons for this, but the way unhealthy food is pushed/promoted in the big chain stores and the prevalence of fast food in lower income neighborhoods are contributing factors.

Just to be super clear again: I have no issue with people buying healthy food or other essentials at the big chain stores, this is a good way to stretch a dollar. My family uses Costco for this, keeping to a strict shopping list of staple foods. But you don't have to look very hard to see that this is not the norm - Americans overspend on cheap and unhealthy foods and we overspend on cheap imported consumer goods - so satisfying in the moment, so disastrous in the long run - to our health, our environment, our finances. So to answer your question about the $1 spent: It ultimately depends on how it is spent and less on where. If we're talking about spending on wholesome food or other true essentials, that's great. Otherwise everyone would be better off if that $1 were invested instead.

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2143
  • Location: Cleveland
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #103 on: March 14, 2016, 06:13:06 AM »
Quote
Honestly, I think you'd have more traction trying to enact mandatory 401k availability for W-2 employees than separating it from employment.

Agreed, realistically.

Although what would be the benefit of doing that over raising the IRA contribution limit? I guess if Congress hates freelancers (or loves big companies, more accurately), the 401K availability would produce less loss in taxes.

No tangible benefit other than the likelihood of getting it passed ;-)

Seriously, I'd love to be able to direct my tax-deferred savings to a direct-deposit account, but my employer plan is good, so it doesn't bother me a whole lot.

maco

  • Bristles
  • ***
  • Posts: 422
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #104 on: March 14, 2016, 08:10:16 AM »
So to answer your question about the $1 spent: It ultimately depends on how it is spent and less on where. If we're talking about spending on wholesome food or other true essentials, that's great. Otherwise everyone would be better off if that $1 were invested instead.
Not eating at all because you live in a food desert with only access to fast food will kill you a lot faster than eating the fast food will. We're talking days/weeks versus decades.

FINate

  • Handlebar Stache
  • *****
  • Posts: 1322
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #105 on: March 14, 2016, 10:19:32 AM »
So to answer your question about the $1 spent: It ultimately depends on how it is spent and less on where. If we're talking about spending on wholesome food or other true essentials, that's great. Otherwise everyone would be better off if that $1 were invested instead.
Not eating at all because you live in a food desert with only access to fast food will kill you a lot faster than eating the fast food will. We're talking days/weeks versus decades.

Yes, but to the extent that this problem exists the solution is to get better food options in those neighborhoods. By definition of low-income and low-access food deserts do exist. What is the causal relationship between poverty, food deserts, and diet? There is ongoing debate about this (http://www.nytimes.com/2012/04/18/health/research/pairing-of-food-deserts-and-obesity-challenged-in-studies.html?_r=1 and http://www.lshtm.ac.uk/newsevents/news/2014/us_obesity_initiative_fails.html as a couple examples).

franklin w. dixon

  • Bristles
  • ***
  • Posts: 283
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #106 on: March 14, 2016, 11:56:23 AM »
One issue with the estate tax is that it can make passing down a capital-intensive family business (farm, as an extreme example) very difficult. All taxes have tradeoffs.

Either come up with the money to pay the taxes or sell the business to pay the taxes.  Why would I treat the business worth $50M any different than a $50M pile of gold?

If I've worked on my family's farm for decades, I'm not sure I should be forced to sell my day job to pay the taxes when a parent passes. Farms require a huge amount of assets to generate even a modest return, so I likely couldn't just "come up with the money".

I thought there were special exemptions for farms though?
Forced to sell your precious day job, with nothing but millions upon millions of dollars to console you! I'm crying great goobery tears for you, poor multimillionaire, with snot and everything. Let us all weep for the handful of gazillionaire Family Farmers(tm) trotted out every time this stupid conversation happens.

franklin w. dixon

  • Bristles
  • ***
  • Posts: 283
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #107 on: March 14, 2016, 11:58:31 AM »
"Look here everyone there are like seven Family Farmers(tm) whose story sounds sympathetic until you realize they are outrageously rich. For that reason we must abolish taxes forever. The case is closed." -Whole bunch of clever rich guys sitting on their pile of loot like Smaug and laughing at how y'all idiots believe them

TheGrimSqueaker

  • Handlebar Stache
  • *****
  • Posts: 2125
  • Location: A desert wasteland, where none but the weird survive
  • www.theliveinlandlord.com
    • The Live-In Landlord
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #108 on: March 14, 2016, 12:37:02 PM »
One issue with the estate tax is that it can make passing down a capital-intensive family business (farm, as an extreme example) very difficult. All taxes have tradeoffs.

Either come up with the money to pay the taxes or sell the business to pay the taxes.  Why would I treat the business worth $50M any different than a $50M pile of gold?

If I've worked on my family's farm for decades, I'm not sure I should be forced to sell my day job to pay the taxes when a parent passes. Farms require a huge amount of assets to generate even a modest return, so I likely couldn't just "come up with the money".

I thought there were special exemptions for farms though?
Forced to sell your precious day job, with nothing but millions upon millions of dollars to console you! I'm crying great goobery tears for you, poor multimillionaire, with snot and everything. Let us all weep for the handful of gazillionaire Family Farmers(tm) trotted out every time this stupid conversation happens.

The land isn't necessarily that valuable or that extensive. Some of it also contains the family home.

WGH

  • Stubble
  • **
  • Posts: 101
  • Location: Houston, TX
Re: 401(k)'s Aren't Working Now, and Never Worked In The First Place
« Reply #109 on: March 14, 2016, 08:27:08 PM »
Good idea. I agree that it makes sense for everyone to get the same livable payout from SS no matter what he paid into the system. I also agree with the poster above who said the reason the system is not that way is because it would be more difficult to get voters to accept it.

Why not have a national 401k type option that anyone could choose to pay into and the federal government would match her contributions up to a certain %? It seems to me like the problems with 401ks are related to the fact that they are connected to employers and the unscrupulous investment firms they are in bed with.

Because those same unscrupulous investment firms make large campaign contributions to various legislators who would decide that sort of thing. Also, the aforementioned corporate payroll tax reasons. Honestly, I think you'd have more traction trying to enact mandatory 401k availability for W-2 employees than separating it from employment. It would be better than nothing?

I think the ideal solution would be some sort of middle ground where companies could still make payroll-tax-exempt 'employer contributions,' but into a tax-deferred account of the employee's choosing instead of one chosen by the company. After all, direct deposit into normal checking accounts works now; why should it be any different for 401ks (or HSAs)? All you really need is a mechanism for the payroll people to be able to verify that the account is of the right type (that the employee isn't trying to direct their 401k contribution into a regular non-tax-deferred savings or checking account or something).

Problem might be vesting. For instance where I work now funds are placed in an employee's account but are vested 20% a year until fully at 5 years. If an employee leaves at say three years they lose 40% of what the employer put in. Since the employer controls the account they can claw this money back if the employee controls the account it might not be so simple.