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Smart folks, southward bound, invested in 401ks, to assure themselves they would be self-sufficient no matter what policy changes/corporate benevolence changes happened. That started decades ago.
Smart folks, southward bound, invested in 401ks, to assure themselves they would be self-sufficient no matter what policy changes/corporate benevolence changes happened. That started decades ago.
Agree. I jumped on the 401K bandwagon when it came to my company.
And I had a pension. Each year I contributed and upped my contribution.
Most other workers did as well. And this was back in 1990.
Smart folks, southward bound, invested in 401ks, to assure themselves they would be self-sufficient no matter what policy changes/corporate benevolence changes happened. That started decades ago.
Smart folks who could afford it, did so. But there are thousands who were already in the workforce for some 35 years before these plans came into being in 1978-1980. Catching up was not that easy and contributions had limits until those were eased.
It's important we don't generalize by presuming that everyone who was working "for decades" had the opportunity to participate in a tax deferred compensation plan all that time.
The section of the Internal Revenue Code that made 401(k) plans possible was enacted into law in 1978, and participating companies, initially, were few. Over time employer and employee participation grew, but not everyone had the opportunity to enroll in a plan early on.
Tax Reform Act of 1984 (TRA '84) - 17,303 plans (i.e. employers offering some kind of tax deferred plan) had a 401k feature integrated into them had 7.54 million active participants.
1990 – Over 97,614 retirement plans had 401(k) feature built in to them and number of active participants grew to 19.548 million.
By 2003 total estimated number of 401k plans had 42.4 million active participants.
You don't ..it's one of the 3 legs of retirement finances.
A 25 year old hearing this has years to plan around it. A 70 year old is already retired and receiving their money. What new planning should they do now ? Go out and get a job maybe ?
Both of my parental units are retired, my dad retired when he was 56. They are in their 70s right now. They've spent their entire life being as frugal as possible...which was difficult for me to understand when I was a little kid. "What do you mean we can't afford that new doll? Why not? You make (I won't disclose) money every year!"
It didn't matter to them that they made pretty damn good money, they CHOSE not to spend it on frivolous things. As an adult, I have learned to go without many of my wants based on that upbringing. I have also learned how to do things in the "entertainment" part of the budget as cheaply as possible because that's how they did everything. We never were without our needs...we just didn't always get what we wanted. I will say, they did teach that very well.
They saved a lot, they also put their money in to other things, for their retirement. People in their 70s had plenty of time to do something, and not rely on pensions.
And yes, after my dad retired, he took on little part time jobs...mainly for something to do, but it was just more money to put towards retirement. As a young adult, I could not comprehend why the hell someone would keep working when they didn't have to work anymore. I now understand, the very fact that you don't "have to" makes it a lot easier to actually do it.
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Originally Posted by Taratova
Savings is vulnerable too. The FDIC could put pressure on the government and call them to change the payout of dollars deposited .. We could get pennies on each dollar because many banks can still go under. The FDIC is a promise too and this can all change through legislation. It is simply robbery of the depositors.
I don't know enough about this...so any question I ask is not to be taken as debate or argumentative, it's to be taken as, "please explain more". Why would they be allowed to do that?
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Originally Posted by southward bound
Sometimes they don't have a choice. Everyone's situation is different - and remember that not everyone has a pension. What are they to do if they couldn't save enough?
Good questions. Even SS is eventually going to be included in means testing.
At some point in your life, even if you didn't know diddly squat about savings or retirement when you were younger, you would get to a point that you say, "I'm either going to work for the rest of my life, or I need to start socking some money away in investments, savings, etc instead of buying all these things to clutter up my house". Or a coffee every day. Or run errands every day instead of once a week and waste money on gas. Or buy things that they don't actually need. Even if you don't make a lot of money, you can find ways to cut expenses. It's that most people don't want to be "inconvenienced". And then there's also those with the mind set, "Can't take it with you, may as well spend it" or "I live in the now" or "I might die tomorrow, I am going to have fun today". That may well be true....but what if you don't die tomorrow?
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Originally Posted by freemkt
why would millions of people rely solely on Social Security in their retirement years?
I haven't the foggiest idea. You should ask them why they didn't do any kind of planning.
southward bound, 1978, when they came to be, was 36 years ago. The vast majority of those not now retired had plenty of time to invest in their own retirement.
Smart folks, southward bound, invested in 401ks, to assure themselves they would be self-sufficient no matter what policy changes/corporate benevolence changes happened. That started decades ago.
Where are 401k's invested.... you trust the stock market?
I trust the stock market as long as one is wise enough to diversify his/her 401K. Overall the market long-term follows EPS and EPS, in the last several years, rocks!
At some point in your life, even if you didn't know diddly squat about savings or retirement when you were younger, you would get to a point that you say, "I'm either going to work for the rest of my life, or I need to start socking some money away in investments, savings, etc instead of buying all these things to clutter up my house". Or a coffee every day. Or run errands every day instead of once a week and waste money on gas. Or buy things that they don't actually need. Even if you don't make a lot of money, you can find ways to cut expenses. It's that most people don't want to be "inconvenienced". And then there's also those with the mind set, "Can't take it with you, may as well spend it" or "I live in the now" or "I might die tomorrow, I am going to have fun today". That may well be true....but what if you don't die tomorrow?
I grew up much the same as you did, and the advice you give is good. However, my mom was a single mom (widow) raising two kids, working hard paycheck to paycheck. Frugality, we knew it well. Even the fresh fruit in our home (when we had it) was rationed. She had to retire at 62 due to disability and wasn't able to continue working after retirement. We kids went to work making extra $$ babysitting and shoveling snow, then took real summer jobs at age 14 and worked the rest of our lives after getting our education (which we paid for by working our way through). So, yes, I know of what you speak.
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Originally Posted by Kawena
Where are 401k's invested.... you trust the stock market?
Great question. Many people lost a great deal of their investments not all that long ago; financial advisers quote that some lost as much as 50%. 401k doesn't afford the choices, nor the opportunity, to manage one's investments. There's a mutual fund manager far removed that manages whatever fund one is invested in, and you have very little to say about it except to sell it and move to a different one - hopefully a better managed one. Of course, when you sell a fund that has negative returns, you lock in the loss and can only hope to make it up elsewhere. If market fear drives people out, then they take the loss by selling at the market low. Those who had the stamina to stick with it made it as the market came back. I stuck with it and did well, but many of my friends bailed.
However, the topic being pensions - since pensions were a part of an individual's retirement planning, those who have them should not now be faced with cuts. The gov't needs to curb itself and rein in spending, not reach into every pocket they can identify.
Where are 401k's invested.... you trust the stock market?
I have a couple of 401-k's and lost a bundle on them when the stock market crashed. I pulled those investments out and have them all in pretty much safe stuff right now. But is anything really safe these days when pensions can be slashed?
Where are 401k's invested.... you trust the stock market?
All investments carry risk.
The stock market has outperformed almost all other investments, over time, including real estate.
If you had bought 100 shares of Google in 2004 @ 84, your investment would be worth about $107,000
( including a two for one stock split) today. Where else could you have parked an initial investment of $8400 and done as well?
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