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I have to hand it to the government. It was a stroke of genius how they wrote the qualified retirement tax code - because it has successfully fooled all of you into thinking it is such a fabulous deal. Now you're upset they are imposing limitations, when it was never a great deal to begin with.
The benefits of tax deferral (most of which you could get in a taxable account anyway) are offset by taxing withdrawals as ordinary income. Instead of paying 5, 10 or 15% on long-term cap gains and dividends, you're paying 25, 28 or 30% on your withdrawals off the same funds.
This act is hardly oppressive. But I guess complaining is more satisfying.
I disagree. Give me an example of someone investing in a taxable vs. A 401k over 30 yrs w say 5% real return.
I want to see your numbers and if what you are saying is truthful.
According to Fidelity, one of the largest 401k providers in the world with over 12 million accounts, the average 401k balance is now around $77,300 as of 2/14/2013. For workers 55 years of age or older, the average balance is $143,300.
The writer of the article goes on to say that AFTER contributing maximum to a 401k, each individual should be saving an ADDITIONAL 20% to be sure of a comfortable retirement.
Basically, it means that only the rich will have a comfortable retirement.
No matter about decrying the "poor" who are out to get something for nothing, the bottom line is that we both need to cut spending AND increase taxes. Limiting contributions to 401k's is just part of the tax solution. Closing airport towers is part of the spending cuts.
Before it's over every single American at every level will see a pinch of some sort. We can cinch up the belt buckles and get on with it or keep whining about how it's not fair to this group or that group.
"Ask not what your country can do for you, but what you can do for your country" applies equally to the rich and the poor.
The writer of the article goes on to say that AFTER contributing maximum to a 401k, each individual should be saving an ADDITIONAL 20% to be sure of a comfortable retirement.
Basically, it means that only the rich will have a comfortable retirement.
No matter about decrying the "poor" who are out to get something for nothing, the bottom line is that we both need to cut spending AND increase taxes. Limiting contributions to 401k's is just part of the tax solution. Closing airport towers is part of the spending cuts.
Before it's over every single American at every level will see a pinch of some sort. We can cinch up the belt buckles and get on with it or keep whining about how it's not fair to this group or that group.
"Ask not what your country can do for you, but what you can do for your country" applies equally to the rich and the poor.
I disagree. Anyone living beneath their means has the ability to save.
You do not have to be "rich" to fully fund your 401K and put away more in an investment account.
It's all about your priorities in life. The typical consumer has monthly subscription/fixed payments out the wazoo.
How many do you have ?
I have 4..garbage, electricity, phone(with internet) and CC bill.
Raised a family and still managed to max out my 401K contribution every year.
When I got raises I bumped up my contribution amount. Money I never had wasn't missed.
I lived beneath my means and always paid myself first every paycheck.
Anyone know what percentage (or raw number) this might affect?
Those with three million in total assets is rather low...
those with that much in IRA's and such must be minute.
As of the end of 2011, there are nearly 2 million households in the U.S. with more than $3 million in investable assets,
including 1,074,000 households with $3M – $4.9M, 654,000 households with $5M – $9.9M and 196,000 households with
greater than $10M [Phoenix Global Wealth Monitor
Tax deferral is a fabulous deal - especially if you're talking about investments that generate ordinary taxable income (like interest and dividends in most years in the last 3-4 decades) and short term capital gains.
It is, but dividends are not ordinary income more often than otherwise (since they are already taxed at the corporate level), and capital gains can be deferred by not selling in taxable accounts. These are two vastly-underrated advantages over qualified retirement accounts. Everyone seems to gloss over this like it's nothing, and yet it makes an enormous difference for anyone willing to take advantage.
Quote:
Originally Posted by CouponJack
I disagree. Give me an example of someone investing in a taxable vs. A 401k over 30 yrs w say 5% real return.
I want to see your numbers and if what you are saying is truthful.
The problem with us going down that road is that examples mean nothing in a world of infinite scenarios. For every example I give you, can counter with one of your own.
Here's what I'll tell you. I know many people whom pay, at most, 15% tax rates on their unearned income and capital gains from taxable accounts. If that same income came from retirement accounts, they would pay, at minimum, 20%-35%.
When it comes to retirement accounts, any growth that occurs on the basis of capital gains and dividends will be taxed much higher than it typically would in taxable accounts. In writing the tax code, the government found a clever way to tax cap gains and dividends at ordinary rates and that is the ugly catch no one considers.
This is not to say you're getting screwed! It's just not the fabulous no-brainer everyone thinks it is. The best benefit to 401ks is the employer-match. That's free money, but the tax advantages are questionable.
As of the end of 2011, there are nearly 2 million households
in the U.S. with more than $3 million in investable assets...
Thanks for the data... but that wasn't the question.
The question is how many have in excess of $3Million in retirement accounts.
(you know, the ones who might actually be affected by this change)
Offhand, I'm finding it difficult to work up much of anything in their defense.
Carlyle Group LP (CG), Blackstone Group LP (BX) and KKR & Co. (KKR), which usually open their doors only to clients willing to commit at least $5 million, are lowering that threshold or offering investments directly to individuals, an effort to attract fresh cash amid lackluster fundraising. Their ultimate goal: a slice of the $3.57 trillion Americans have accumulated in their 401(k) retirement plans.
Assets in 401(k)-
Quote:
type plans will grow about 6 percent a year to $5.03 trillion by 2016, surpassing the $4.9 trillion projected for public pensions and widening their edge over private pensions, according to Boston-based research firm Cerulli Associates
Quote:
U.S. Senator Tom Harkin, an Iowa Democrat and chairman of the Senate Health, Education, Labor and Pensions Committee, is pursuing changes to 401(k) plans. Harkin has said he will introduce legislation this year that would create so-called USA Retirement Funds blending features of pensions and 401(k)s to improve worker outcomes.
Thanks for the data... but that wasn't the question.
The question is how many have in excess of $3Million in retirement accounts.
(you know, the ones who might actually be affected by this change)
Offhand, I'm finding it difficult to work up much of anything in their defense.
Don't I have a hunch they aren't counting on you to defend them. This like most things will ultimately be decided by who is most able to influence the legislative process and depending on those results how they and their tax attorneys plan alternative strategies for both their retirement assets and their estate planning.
As we are seeing now money Red states will continue to become more tax friendly and as in the case of NC if they do away with all income tax and increase the sales tax it will help to balance things out. Hey it will probably help attract more wealthy retirees.
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How much is the average 401k?
