Greased by lobbying and campaign cash, tax breaks for retirement savings are one thing Congress agrees on. But they also blow out the deficit and add to income inequality.
Five months before Congress faced a near-catastrophic standoff over the debt ceiling, with Republicans demanding restrictions to food and Medicaid programs to rein in spending, a bill that raised the cost of private retirement savings accounts to $282 billion per year was quietly signed into law.
In this era of deeply divided politics, the 2022 bill known as Secure 2.0 was hailed as a bipartisan success — a victory for average Americans. It had sailed through the House by a whopping 414-5 vote. It followed four other major bills passed between 1996 and 2019 that dramatically expanded taxpayer savings – all equally lauded as bipartisan victories.
But that rare issue that brought a divided Washington together also increased wealth disparities and the federal deficit. And the victory was most strongly applauded by the burgeoning financial services industry, for whom tax-advantaged retirement savings has transformed a $7 trillion retirement market in 1995 to a $38.4 trillion behemoth in 2023.
401k was originally supposed to be a simple thing. It was supposed to be a way to avoid taxes on bonuses for more highly paid execs in the banking industry, but also regular employee bonuses too. They sold it to regular workers who might have gotten a few hundred dollar bonus by the employer “matching” the contribution to the 401k.
There was supposed to be a “three legged stool” for retirement. Social security, company defined benefit (pension), and then the 401k. Companies have done everything they can to get rid of traditional pensions, social security is under constant attack and the age you get it is pushed back, and the 401k is being looked at for taxes, being restricted by companies to high fee funds, and loses cash when transferring employers.
Retiring in the country is difficult at best, impossible for most, and constantly under attack for those who have a shot at it.
We’ve learned that a good chunk of leaders don’t care for three legged stools. They know the best way to destroy them is to knock out one of the legs.
Look at the individual mandate in the ACA as a perfect example (the other two being pre-existing condition coverage and plan subsidies).
I do have to wonder if the absence of company defined pensions are a big part of the reason people job hop so much. A good pension was a good reason to lay down roots at a company. My current employer has a really good 403b match but the only thing really keeping me around is waiting to get fully vested.
Nah, people job hop because they’ve realized employers will never give them a raise that keeps up with inflation, so they leave for a higher paying job that let’s them, y’know, make rent and pay bills.
Yes, that’s a factor…for some reason employers think that paying more for new talent is better than paying the same amount for people that already have institutional knowledge.
But anywhere you go is going to be giving the same raises year over year.
Which really makes me wonder why salaries haven’t spiraled out of control or how this ever became an issue. You’d think the “new employee” rate would grow faster than the “current employee” rate. If the “current employee” rate climbs by 2% each year, and the “new employee” rate increases by 4%, it wouldn’t take long for a very wide gap to appear.
But that doesn’t happen. Somehow we manage to be perpetually able to find a new job with a higher salary every few years.
I think the “quitting for a raise” is overblown. Whats happening is quitting for a promotion, and that leads to another problem of title inflation and disparity between employers.
I could search for my title at my current employer and find jobs I’m nowhere near qualified for, paying about the same. And I could search for my original title and find jobs paying 1/2 as much as what I was hired at a few years ago. Shit makes no sense.
Multiple times, people here on Lemmy have assumed I have a 401(k), as if it’s something everyone has, and it always amuses me.
Are you American?
Yes, that’s why I’m poor.
It probably is something you should have after a certain age. If not a work supplied 401k, then at least your own managed Roth IRA. And if you’re still on the younger side, it’s perfectly understandable not to have a 401k yet.
From where should I have gotten the money to invest in it?
an actual career at a real company.
Well excuse me for not being the success you are. Fucking poor people not pulling themselves up by their bootstraps, am I right?
No. It’s the exact opposite. It’s your company not putting in the minimum to support it’s employees.
Welcome to a life in the entertainment industry. In behind-the-scenes roles that didn’t even have unions until recently in some cases and were usually contract positions anyway. And then a series of low-end jobs after that because I moved back to Indiana where I was from because there are no entertainment industry jobs here.
What can I say? I haven’t been a success.
Hey, I see you a lot on here, and from one of your other comments in this thread I can see why I might see you more often.
You were probably being sarcastic with that success comment, but just in case you weren’t… Success isn’t a single definition, and I hope you don’t dwell on the cookie cutter model of “success” too much. Be the absolute best you can be for yourself and those you love, that’s success too.
I hope there’s a positive outlook for you healthwise. And despite there being some short sighted shit birds, there’s also some good folk on Lemmy/fedi, and I think you’re one of em. Hang in there comrade.
You can put $5 a week into it if you want to. $38/ week ($2k/yr) will get you the full $1K savers credit if you don’t have access to a retirement account through work. So essentially you’re only contributing $1k and doubling it with the tax credit.
That doesn’t sound like enough to retire on.
Fine, then think of it as free money to supplement your income with when you’re 60+.
You would be wrong. Compounding is an absolute beast. It’s nearly a Million. Let’s say you are 25 and just starting out. You manage to put in $1000 a year and get the $1000 credit. Let’s say you do this exact same thing until you are 65. You invest it in the S&P500 Index which historically returns ~10% annually…
Balance at 65: $929,444
Total contributions: $80,000
Employee contributions: $80,000
Employer match: $0
Investment returns: $849,444
If only I had an extra $1000 a year.
Well if you stopped buying frivolous items like GROCERIES you’d have plenty to invest. Then you could enjoy your retirement for a comfortable 3 years before going back to work
We were talking to my daughter about this just yesterday. It’s not even groceries. People think that if you spend $30 or $40 a month on things that make you and those you love happy, you’ll never save enough to make yourself marginally more comfortable in the last 10-20 years of your life (if you’re lucky) that will be uncomfortable no matter what.
So I suppose maybe if I denied myself and my child every pleasure in life, sure, I could put money in a 401(k). That is not something I would do and I certainly do not think it’s a good lesson to teach a child. I’m sure someone will call that some sort of “live for today” or YOLO attitude rather than not giving your child the most miserable childhood you can.
So I suppose maybe if I denied myself and my child every pleasure in life, sure, I could put money in a 401(k).
But that’s unproductive hyperbole. Not every pleasure in life costs money, and lots of things you spend money on can be optimized. And even after doing that, if you still feel too squeezed, it might be worth considering a career change and a plan for how to get there.
It might be unproductive hyperbole, but I’ve been told that exact same thing more than once right here on Lemmy.
Sounds like you have an axe to grind. Sorry life has been hard for you friend. Hope it gets better. Hang in there.
I promise you, if you put that $30/month into your own IRA, you’ll make her a lot happier when she doesn’t have to support you when she’s grown up.
The problem isn’t spending a little to make you or your family happy, it’s spending for consumable things today, that’s going to put you at a huge disadvantage later.
I get it, I have two kids, it’s fucking expensive. But you know what’s even more expensive? Taking care of old people.
“I know you want that doll, honey, but I’ve put the money for it into an IRA and it will make you a lot happier when you don’t have to support me when you’re grown up.” You do you with your kids, I’m going to get mine things that will make her happy.
And she already knows she has no obligation to support me. I’ve made that clear to her.
Do you really think she’s just going to let you starve and live on the street?
And yes, that’s exactly what you say. Funny how it’s not things that make kids happy, it’s spending time with them. Reading to my daughter her favorite book for the 1000th time is much more enjoyable than just buying her a new doll.
It’s also a great lesson in short term happiness vs long term happiness.
You were telling your daughter that you’re spending $30/mo on her to make her happy instead of saving it for your old age? I don’t know how you communicated that, but on the surface that does not sound like a healthy thing to tell a child.
If you’re worried about providing your daughter a fulfilling childhood, maybe also consider prioritizing time with her? You spend a lot of time on Lemmy dude, is that time you could be spending with her? Or are you on your phone a lot when you’re with her?
Do you think that maybe you don’t pay attention to what actual times of day I’m on Lemmy vs. when I’m not on Lemmy and think that maybe I spend those times with my family?
I’m here a lot because I’m currently very sick (I recently got back from the Mayo Clinic). I suppose that’s my fault?
If you work for a company that has a 401k then you need to sign up for it. If the company has a match percentage then that is the absolute minimum you should contribute. And when you are younger you should set it up as a Roth so you pay taxes on it now.
This isn’t a thing you should do at a certain age. The younger you start the better. The money just comes out of your paycheck, same as taxes.
I do not work for a company that offers such a thing. And I never have.
This is what I’m saying about assumptions.
You can sign up for a Roth IRA then, there’s no need for anything from your employer to get one. As far as I recall there’s no minimum amount of money you need to put in at start.
This is really good advice. There’s no minimum, but there is an annual maximum of $7K.
If your employer doesn’t offer a 401k or similar plan, the IRA limits are actually higher.
With what money?
The money your earn for working.
