Author Topic: It's not your fault if you can't afford to retire!!  (Read 5054 times)

andyp2010

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TheGrimSqueaker

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Re: It's not your fault if you can't afford to retire!!
« Reply #1 on: November 01, 2015, 02:04:22 PM »
Politicians don't have the power to stop people from doing dumbass things. Or, at least, not for long.

During the Italian Renaissance, there was a massive gap between the haves and the have-nots. There was also a culture of massive conspicuous (over)consumption, in which the artisan and small merchant class would try to "fit in" with other upwardly-mobile people. This meant they would grossly overspend on entertainments, clothing, food, and especially dowries. Everyone wanted to prove that he or she had as much money as Lorenzon de'Medici, but too many people were getting in debt as a result.

So, in order to maintain the status quo and rein in some of the spending, Church and secular leaders in Florence and some of the other Italian city-states developed "sumptary laws" which attempted to curb people's spending. All of a sudden, there were limits as to how many dishes you could serve at a banquet, how much of a dowry it was legal to give, how many servants you could have, and what kind of clothing you could wear in public.

In the short term, the servants and merchants who made a living catering to the big spenders (but who did not belong to a class where they felt obligated to participate in the overconsumption) were screwed financially because their livelihoods collapsed. A few wealthy people and social strivers were moderately embarrassed when they got caught violating the laws, until it occurred to them to start competing with each other to find ways to get around the sumptary laws. The poor didn't get any richer, nobody was induced to save instead of spending, and politically it accomplished bugger-all except to get large numbers of people pissed off at the Church and at their governments.

boarder42

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Re: It's not your fault if you can't afford to retire!!
« Reply #2 on: November 01, 2015, 04:23:27 PM »
OK yeah its all complainy. pants.

BUT.  Point number four should ring true across here.

Why should it matter what your employer provides you with as far as tax sheltered retirement savings. 

If they want to cap tax sheltered retirement savings it should just be a universal cap.

Ie. 18k for 401k + 5500 for IRA + that employer match cap. So why not just say you can shelter x dollars to retirement accounts annually. Simplify the complex system.

JZinCO

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Re: It's not your fault if you can't afford to retire!!
« Reply #3 on: November 01, 2015, 04:45:00 PM »
The overall tone is complainy pants. The complainy pants tone is dangerous because it encourages cynical, defeatist attitudes.
But there are some buried policy proposals in the short article. I wouldn't mind a policy-wonk tone because there are some steps that can be done from up high to better the american retirement system.

JLee

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Re: It's not your fault if you can't afford to retire!!
« Reply #4 on: November 05, 2015, 09:34:25 AM »
Quote
Second, the tax code offers the least help to save for retirement to those who need help the most, especially lower-income earners who do not work for employers that offer retirement benefits.

I'm not sure this is correct...those of us who make more than 61k start to lose the ability to deduct an IRA.  Lower-income earners (if we're talking at a level likely to not have 401k access) are probably not maxing their IRA either, making this irrelevant (also, the Savers Credit exists).

beltim

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Re: It's not your fault if you can't afford to retire!!
« Reply #5 on: November 05, 2015, 09:41:04 AM »
Quote
Second, the tax code offers the least help to save for retirement to those who need help the most, especially lower-income earners who do not work for employers that offer retirement benefits.

I'm not sure this is correct...those of us who make more than 61k start to lose the ability to deduct an IRA.

Only if you have access to a 401k at work, which automatically gives you three times as much tax-deferred space as someone who doesn't.

Gone Fishing

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Re: It's not your fault if you can't afford to retire!!
« Reply #6 on: November 05, 2015, 09:45:26 AM »
Quote
Second, the tax code offers the least help to save for retirement to those who need help the most, especially lower-income earners who do not work for employers that offer retirement benefits.

I'm not sure this is correct...those of us who make more than 61k start to lose the ability to deduct an IRA.

Only if you have access to a 401k at work, which automatically gives you three times as much tax-deferred space as someone who doesn't.

Probably the most serious flaw in our current system!

JLee

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Re: It's not your fault if you can't afford to retire!!
« Reply #7 on: November 05, 2015, 10:04:24 AM »
Quote
Second, the tax code offers the least help to save for retirement to those who need help the most, especially lower-income earners who do not work for employers that offer retirement benefits.

I'm not sure this is correct...those of us who make more than 61k start to lose the ability to deduct an IRA.

Only if you have access to a 401k at work, which automatically gives you three times as much tax-deferred space as someone who doesn't.

This is true, but based on the article's wording they are assuming that lower income workers are the ones getting screwed. If anything, the tax impact on a higher income worker without 401k access would be much more severe (no savers credit, higher tax bracket).

I really wish 401k and IRA contribution amounts could be retroactive. I started late this year (didn't try to max 401k 'til May) so I'm in catch-up mode to max everything by Dec 31st, but I've lost the years prior where I didn't take advantage of them. :(

fattest_foot

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Re: It's not your fault if you can't afford to retire!!
« Reply #8 on: November 05, 2015, 10:22:11 AM »
OK yeah its all complainy. pants.

BUT.  Point number four should ring true across here.

Why should it matter what your employer provides you with as far as tax sheltered retirement savings. 

If they want to cap tax sheltered retirement savings it should just be a universal cap.

Ie. 18k for 401k + 5500 for IRA + that employer match cap. So why not just say you can shelter x dollars to retirement accounts annually. Simplify the complex system.

That was the only point in the article that stuck out to me as a legitimate complaint. The rest was "blaming someone else for my own unwillingness to save" type of stuff.

I've never understood why there is such a vastly different cap on 401k's versus IRA's. I also can't figure out why the cap on IRA's is still so low? Are we really worried that a millionaire is going to stash an extra $10k a year into a tax advantaged account?

Jack

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Re: It's not your fault if you can't afford to retire!!
« Reply #9 on: November 05, 2015, 10:53:04 AM »
Quote
Second, the tax code offers the least help to save for retirement to those who need help the most, especially lower-income earners who do not work for employers that offer retirement benefits.

I'm not sure this is correct...those of us who make more than 61k start to lose the ability to deduct an IRA.

Only if you have access to a 401k at work, which automatically gives you three times as much tax-deferred space as someone who doesn't.

This is true, but based on the article's wording they are assuming that lower income workers are the ones getting screwed. If anything, the tax impact on a higher income worker without 401k access would be much more severe (no savers credit, higher tax bracket).

People don't get screwed because they have to pay taxes, they get screwed because they can't afford to save at all. (Okay, so maybe saving on taxes has some effect on that at the margin, but that's not the point. If you're making and saving enough to be worried about taxes, you're already winning -- remember, almost half of Americans pay less than $0 Federal income tax.)

I really wish 401k and IRA contribution amounts could be retroactive. I started late this year (didn't try to max 401k 'til May) so I'm in catch-up mode to max everything by Dec 31st, but I've lost the years prior where I didn't take advantage of them. :(

I agree. Decouple contribution limits from employment (and maybe healthcare), let everybody pick any brokerage (and/or the TSP!), and let everybody "catch up" to their full lifetime contribution (but perhaps don't allow them to front-load it) and you'd solve most of the problems with the current retirement scheme that aren't caused by investor ignorance or stupidity.