How could anyone think that 401K is a scam?
Where in fact, there's a good news about those people who have 401(k) plans.
Find out more:
How could anyone think that 401K is a scam?
Where in fact, there's a good news about those people who have 401(k) plans.
Find out more:
While your HR department might be useless, the problems you describe really come from higher.
Find a better company.
If you've got any talent you'll be making a $100K by the time you're 35 and $200K by the time you're 45. Tee chances are you'll have moved to a different company by then, with a more generous employer match.
My 401K has average more than 10% gains per annum, which will will leave me with more than enough to retire on. Maybe a Roth IRA would have yielded me more but I'm happy the way things are.
401k is A retirement account, not THE retirement account. 401ks are great for young people because the returns really blossom after @40 years. Setting aside a very reasonable amount when you are young will mature into a very nice account when you hit 67. The 401k rules keep you from raiding the account and lock away the money. My dad was very diligent about his 401k from the moment he started working. He had a good career as an executive with a defense contractor. Over the years he invested in real estate, stocks and in small business ventures with friends. The 401k out performed everything and ended up being the majority of his retirement nest egg. He had some bad luck investing, but nothing major. Point is that you should not look to your 401k as your only retirement savings, but you must have a 401k as your sure thing retirement account and only use funds above and beyond for investing. Taxes in the year 2060 may be higher, but that won't matter if you never built solid retirement savings.
young professional wrote:
You make a nice point, and I am aware that 401k contributions can lower my taxable income, but this example doesn't really apply in my situation. I make $60k a year. Since I am single, this puts me in the 25% federal tax rate. To get down to the 15% bracket, I'd need to put about 25,000 into my 401k this year. That is simply unrealistic.
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[Slaps forehead.] 25% is your MARGINAL tax rate, dude. It's not as though all of your income is taxed at that rate, just the portion above about $36k or so. So any $$ you can put into a 401k (and you can only put in up to $17.5k, not $25k anyway), will lower the amount of $$ that are taxed at 25%. Whether you make $38k or $83k, the EXACT same amount on that is taxed at 10% and 15%, and the only difference is how much is taxed at 25%. It's not as if the rate changes on all of your income when you fall into a lower bracket (as you seem to imply). So this argument absolutely DOES apply to your situation -- by not contributing to your 401k, you are subjecting relatively more of your income to an immediate 25% tax rate.
kaitainen wrote:
oh my holy god the information on this thread is woefully and shockingly inaccurate.
I know this is a response to a two year old post from a departed (and missed) poster, but the above statement needs emphasis.
When I do education for my clients and their 401k plans, the ignorance is astounding, yet the participants have such smug attitudes thinking they know better.
It's so easy for someone to get on their computer thinking they are finding the truth, but all they are looking for is information they want to hear and believe, then they pass the ignorance on to others.
The day is fast approaching where do it yourself investment wizards are going to realize they screwed up, and it's too late to fix it. Then they will look to blame somebody.