Are 401ks over rated? (credit, cash, income, markets)
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I’ll never understand why anyone doesn’t take the match. Even if you have zero intention to save for retirement, you could take the money out every year or something and pay the 10 percent penalties and taxes and still come out ahead.
I guess I’m glad they don’t all take it because my wife and I wouldn’t be each getting dollar for dollar matches to 7 percent.
Winner.
Maybe if they taught this kind of stuff in the schools, instead of music and art....people would know better. Never mind -- it's more important that the students know who Mozart was.
we had no pensions in most companies in my working lifetime long before there were 401k's .
Thank you for saying this!
People love to act as though everyone got a pension in the "good ol' days". Reality check: They didn't. And many places with pensions had super long vesting periods (say 20 years). Then they'd lay people off just before they qualified. 1974 ERISA legislation was designed to end those and other abuses. It ended up making pensions more expensive, which meant employers eventually did away with them.
Maybe if they taught this kind of stuff in the schools, instead of music and art....people would know better. Never mind -- it's more important that the students know who Mozart was.
Parents should accept some responsibility there as well
Parents should accept some responsibility there as well
I agree with that. The problem is most parents are financially illiterate themselves. So you have a "blind leading the blind" type of scenario in most cases.
I'd take a fully funded defined benefit pension plan any day where the investment risk is on the employer. In lieu of that I think a solid company match on a 401k is the next best retirement vehicle depending upon fund and management fee.
Maybe if they taught this kind of stuff in the schools, instead of music and art....people would know better. Never mind -- it's more important that the students know who Mozart was.
401K benefits are about simple math, and paying attention to detail. They have nothing to do with being financially savvy.
I would much rather live in a community of people who are aware of Mozart, and classical music in general, than of experts in 401Ks.
Quote:
Originally Posted by SWFL_Native
I'd take a fully funded defined benefit pension plan any day where the investment risk is on the employer. In lieu of that I think a solid company match on a 401k is the next best retirement vehicle depending upon fund and management fee.
This depends entirely on the terms of each option. A 401K with no employer-matching, is inferior to a defined-benefit pension that vests after say 5 years. But what of a pension where the employee doesn't qualify for benefits until age 62? Say that the employee starts as a college-intern, at age 20... and quits after 20 years, at age 40. That's 22 additional years for inflation to ravage the pension, before the pension-payout commences. Compare that to a 401K plan with 7% matching, that vests after 1 year of service.
Defined benefit pensions are fantastic for older employees, whose present age isn't far from pension-eligibility age. Defined benefit pensions reward employees for being old, and only secondarily for staying a long time. Defined contribution benefits are great for employees who start young, taking advantage of compound-returns in the market. They all for early retirement.
To the OP...if you were truly good with investments, you wouldn't even be asking this question.
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