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It's all kind of a moot point. The Social Security program is no longer cash flow positive. It's now paying out more than it is taking in. The "trust fund" is not real. When you're cash flow negative, you either need to raise taxes, borrow money, or stop paying something else in the Federal budget. It would be the political third rail to cut benefits so that's not going to happen.
No matter how you cut it, rich people are going to pay much of the eventual tax increase. They own the corporations that pay the employer half of payroll taxes. They're the ones with maxed out Social Security contributions. If the earned income cap is lifted or passive income sources start being taxed, they'll be the ones paying almost all of that.
Right now, all the rhetoric is to delay the tax hike as long as possible. It piles on the national debt so not the best financial move for the country but that's how it's going to play out with today's Congress & President.
Rich people pay very little taxes compared to the poor. Warren Buffet says his secretary pays more taxes than he does. The poor subsidize the rich
If it is automatic to participate in a 401k and effort needs to be taken to opt out, that would increase participation
Yes, it would increase participation. But forcing people to spend their money on something that they don't want isn't generally a good idea, even if its for their own good.
Rich people pay very little taxes compared to the poor. Warren Buffet says his secretary pays more taxes than he does. The poor subsidize the rich
When it comes to SS, people who pay up to the SS max cap get 25% of their pre-retirement income in payments when they collect. People at the lowest end get 52% of their pre-retirement income when they collect. One is getting a substantially better return on their SS contributions. Where do you suppose the money fund the difference comes from? Hint.... it's not from the people making 22K a year.
As to Federal taxes, the top 50% of wage earners pay 97.3% of all taxes while the bottom 50% kick in 2.7%. On average the top 1% of taxpayers paid a 27.1% income tax rate which is more than 7 times higher than the bottom 50% who paid at an average rate of 3.5%.
So no, the poor are not subsidizing the rich. Not as it pertains to SS and not as it pertains to Federal tax.
If it is automatic to participate in a 401k and effort needs to be taken to opt out, that would increase participation
In 2016 my workplace put an automatic 3% enrollment in place for new hires as well as a 1% automatic increase every Jan 1 for all plan participants. In order to opt out, you had to just log in to the HR site and submit a form. Guess what? Participation rates overall didn't rise and the calls on Jan 1 about paychecks being smaller were so insane, they removed the auto increase for the next year.
According to HR, making contributions automatic had no effect. Trying to slowly increase people's contributions didn't either. They even suggested to people that with the decreased tax rates that this would be a great time to increase one's 401K....... crickets.
https://www.federalreserve.gov/faqs/currency_12773.htm
Q: How much U.S. currency is in circulation?
A: There was approximately $1.61 trillion in circulation as of January 24, 2018, of which $1.56 trillion was in Federal Reserve notes. (Dollar bills)
That's roughly $4000 per capita.
It may be prudent to expect all pensions denominated in money to be kaput.
That leaves old fashioned production of surplus usable goods and services, equitable trade and enjoyment thereof.
Why do I care about "currency in circulation"? That is a pretty minor subset of the money supply, isn't it?
According to recent data, 79% of workers have access to a 401K plan. However, only 41% of them actually participate. The “trouble” doesn’t just exist due to the lack of 401K plans, but from the fact that even when one is a available many people choose not to take advantage of it.
Very early in my career, I worked for a company that had a 401K, but I did not participate in it.
Why didn't I participate? They didn't call it a 401K. They gave it some cutesy-poo marketing name unique to that company. The HR brochure talked about high level marketing benefits, but it was not specific enough for me to figure out it actually was a 401K. And I was in my middle 20s and working 60-70 hours/week and just didn't have the time to figure out what the heck it was.
In hindsight, I was pretty stupid not to have figured out it was a 401K and to have participated in it.
Quote:
Originally Posted by UNC4Me
There’s no reason to assume that a federal 401K would have better participation given that 38% of people who have the option decline even if free money in the form of a match is available. Some people just cannot or will not save for retirement.
I agree.
For some it is actually a rational decision. In Silicon Valley, for example (not that Silicon Valley is representative of many places), the price of housing is ridiculously high and growing at a fast clip - much, much faster than inflation or wage growth or the stock market. How ridiculous? See https://sf.curbed.com/2018/3/2/17073...d-price-crisis. "848 sq ft Sunnyvale House for $2Million"
It is not uncommon for some employees who work for a Silicon Valley company that offers a 401K with a match not to take advantage of it because they are saving $$$ for a downpayment on a house. Then, once they have a minimum downpayment, they stretch to buy a house, banking on future price increases. In the interim, they have to pay the mortgage - and they are using money that some might say to put into that 401k to instead help fund the mortgage payment. Over time, they hope, their compensation will go up along with the value of their house.
At the end of the day, they are using the house as a vehicle to build wealth to fund their retirement rather than using the employer-sponsored 401K. And they are doing this consciously and rationally.
Last edited by SportyandMisty; 04-04-2018 at 04:07 PM..
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