
Americans Are Putting Billions More Than Usual in Their 401(k)s - uptown
https://www.bloomberg.com/news/articles/2017-01-04/americans-are-putting-billions-more-than-usual-in-their-401-k-s
======
callinyouin
I'm not planning on Social Security being around by the time I'm old enough to
tap into it, and I'm also not planning on having any kids to bail me out when
I go senile, so yeah I'm putting a lot into my 401k. I think a lot of people
my age (turning 30 next week) are feeling the same way, so I wonder if it's
younger workers driving this trend.

~~~
DoodleBuggy
> "I'm not planning on Social Security being around by the time I'm old enough
> to tap into it"

You need to change that attitude or your complacency will allow politicians to
take it from you. The fact is you pay ~16% of your paycheck into social
security and medicare, it is designed to be like a pension. It is not an
entitlement, it's your money.

~~~
jandrewrogers
It is not your money, it is a tax on income like any other. The Supreme Court
established in 1960 (Flemming v Nestor) that contributions to Social Security
are not your property and the government has no obligation to ever pay you
benefits regardless of contribution. People have had this entitlement revoked
in practice, though the targeting tends to be selective for out-groups and not
a substantial fraction of the population.

The government strongly encourages belief in the myth that Social Security is
something other than a welfare tax with no implied obligation to the taxpayer
because that notion makes the tax much more palatable than the reality.

~~~
rebootthesystem
Yes. I wish more people understood this.

The other one nobody seems to want to talk about or understand is Medicaid.
People think they are getting health insurance (or whatever they want to call
it) when, in reality, they are accumulating debt with the government and a
debt most states are required, by law, to collect.

This is one of the huge problems (outside of costs and lies) I have with
Obamacare. The claim is that millions of people now have insurance when, in
reality, millions of people were shoved into Medicaid and are accumulating a
non-trivial financial obligation with the government. To say this is dishonest
is probably cutting it short.

[https://www.medicaid.gov/medicaid/eligibility/estate-
recover...](https://www.medicaid.gov/medicaid/eligibility/estate-
recovery/index.html)

~~~
mywittyname
I'm not sure why you're saying that using Medicaid is equivalent to
accumulating debt with the Federal government. Medicaid is health insurance.

It's true that Medicaid will seek reimbursement for procedures that should not
have been covered, but that's not different much different than what happens
when a private insurance company refuses to pay a benefit. The hospital is
free to pursue the person directly for the balance they owe.

~~~
greedo
If you use Medicaid, you're expected to first deplete almost all of your
financial resources to pay. It's not unusual to even have your home become an
asset that will be eventually taken by the government.

~~~
zaroth
After ACA this is no longer true in Medicaid expansion states.

There is no asset test, and there is no paying back benefits if you are under
65 when you took them.

Medicaid expansion is quite literally the best insurance that money can't buy.

In CA, for example, a family of 4 earning less than $33,500 gets MediCal [1].
If you just want free coverage for the kids, you can earn $64,600. [2]

[1] - [http://www.dhcs.ca.gov/services/medi-
cal/Pages/DoYouQualifyF...](http://www.dhcs.ca.gov/services/medi-
cal/Pages/DoYouQualifyForMedi-Cal.aspx)

[2] - [http://hbex.coveredca.com/toolkit/renewal-
toolkit/downloads/...](http://hbex.coveredca.com/toolkit/renewal-
toolkit/downloads/2016-Income-Guidelines.pdf)

~~~
krapp
ACA is likely about to be repealed.

~~~
zaroth
And maybe that's a good reason why it should be.

A progressive tax system should not be paired with a regressive subsidy as
massive as ACA. It adds up to nearly a 100% tax on the first $60,000 of income
for unhealthy / chronically ill families, and a 60% effective tax rate for
healthy ones.

------
codegeek
For self employed, it is even better. You can put up to 54,000 for 2017 [0].
If you are self employed and can afford to do this, do it. It usually splits
in 2 parts:

\- Employee portion: $18,000 that you can put as an employee.

\- Employer portion: Up to 25% of W-2 wages.

The total of the 2 above cannot exceed 54K for 2017. One more thing, you can
make contributions for employer portion until the calendar year end which is
March. So even for 2016, you can still make the employer portion if you were
enrolled in a self employed 401K. Another thing is that the employer portion
can be shown as an expense of your business as well.

If you use Fidelity or Vanguard, stick most of it in an index fund and you
have the S&P 500 returns by doing nothing.

I highly recommend any self employed to read this IRS publication.

[0] [https://www.irs.gov/retirement-plans/one-
participant-401k-pl...](https://www.irs.gov/retirement-plans/one-
participant-401k-plans)

------
temp246810
Even though I'm doing all the right things like maxing out 401k etc., I can't
help but feel that I will regret it later.

It feels like everyone grew up hearing the same thing (people are poor
planners, people go broke in retirement) and now as adults have vowed that
will never be them.

The problem is that now everyone thinks this way - index funds are on the
rise, people are saving into their 401k, I can't help but think that I should
be zagging here when everyone is zigging. Unfortunately, however, I can't
figure out what that other thing should be.

~~~
pillowkusis
I've been feeling the same way. Having millions of people and billions of
dollars blindly dumped into index funds leaves me uneasy. Many view index
funds as a "7% return machine". The conventional wisdom is "buy and hold",
blindly, regardless of what the market does, what companies fail, or who
you're investing in. Most 401k users probably couldn't name more than 10
stocks that their fund is comprised of. Stock markets assume people buy stocks
because they believe in some fundemental value of the stock, and have thus
done analysis to believe so. When markets are composed of people who don't
adhere to this philosophy... I'm not sure what happens next. Having such a
large mass of investors who are not thinking rationally about their investment
seems like a recipe for disaster, but I'm no economist.

REITs, small-cap funds, international stocks, and perhaps commodities seem
like the best choices if you're looking to diversify. The reality is if
everyone's investment behavior precipitates a large collapse, pretty much no
sane investment strategy is going to do well. Diversify, hedge your bets, and
just stop worrying about it. That's the conclusion I've come to, anyway.

~~~
dlp211
The whole point of index funds is to insulate yourself from a single company
failing. What happens when 1 of the 500 S&P 500 companies even declines is
that it is substituted for with another, stronger company. Index funds are not
static, they just sometimes appear that way.

------
timrosenblatt
FWIW "Billions of dollars" should be considered in the context that 1 million
people * $1,000 = $1 billion. The US is ~300m people. So, this headline is
something like "1/3 of 1% of the US is putting an extra $1,000 in their 401k
recently" (really more like 1-2% of the _workforce_ but the point remains)

------
chrisabrams
Am I the only one that is scared of 401ks? It sounds nice: put your money into
an account tax-free, let it grow tax free over 30-40 years. When you retire,
you have this nice large fund to pull money from.

My biggest fear is that in 30-40 years the US government and/or 401k funds are
so poorly run that they tax 50/60/70% of the income (withdrawals) out of the
401k to sustain theirselves. Lots of people tell me "that won't happen" but
when I study history, I realize that the only people who think that are ones
who have never lived through a major war. Wars = higher taxes. To me, putting
money in a 401k is trusting that everything will be ok for a long time to
come, and it's just hard to justify that the way history books show the cycles
of war.

It scares me so much that I'd rather pay the taxes now, and invest as I
please.

Edit: as omouse mentioned, that is my other fear. That through technology and
healthcare innovations, as well as the government recognizing the need to
"adjusting" the retirement age, how do I know I will get my 401k at 65? What
if it is 85? That's too risky for me :/

~~~
djrogers
You don't quite understand 401ks. You can choose either contribute tax free
(traditional) or have tax-free growth (Roth). You can't do both in the same
account.

This doesn't change the fact that the rules may be changed at some point, but
given the ridiculously low limits on 401k contributions anyway you might as
well put some money in one. Worst case scenario is you wind up paying taxes on
t anyway, but then again you might not.

No matter how you slice it you won't wind up paying _more_ taxes than you will
if you pay them now and invest without any tax sheltering.

~~~
dlp211
Nitpick, but both a traditional and Roth provide tax-free growth. A Roth
allows tax-free distribution is what I believe you intended to say.

------
bogomipz
It's interesting when the 401k was introduced it was meant to be one leg in a
"three-legged stool" for retirement planning.

Those three legs consisting of pension, social security and savings when it
was introduced.

For people in the private sector that is now a two-legged stool as pensions
went the way of the evening news paper and indemnity health care plans.

Its interesting to note that law makers in Washington DC all have pensions and
indemnity health care plans. Only the best for them. I've often wondered at
how different things would be if they were subject to the same health care and
retirement options as the rest of the population.

[http://www.investopedia.com/ask/answers/09/three-legged-
stoo...](http://www.investopedia.com/ask/answers/09/three-legged-stool-
retirement.asp)

[http://financialanswers.com/page.php?b=24549975-0&c=1027](http://financialanswers.com/page.php?b=24549975-0&c=1027)

------
sikim
I wonder what percentage of 401k contributors has an IRA. General rule of
thumb is to contribute enough to 401k to get maximum company matching and max
out your Roth IRA contribution first. IRA is generally preferred because you
can choose your own fund (e.g. Vanguard) and has more flexibility in certain
situations. By having both pre-tax (401k) and post-tax (Roth IRA), you would
be also diversifying your tax liability in your retirement.

~~~
briHass
One problem with the Roth IRA is the income phase out limits. If you're
single, if you AGI is >117K, you can only contribute some percentage of the
$5000 allowed for the Roth. If you're >132K, you can't contribute anything.
For a married couple, those limits are 184K/194K. Granted, you can reduce your
AGI by contributing to a 401K first, which allows you to take $18K off the
top.

I know this doesn't affect many, but for the high-paid tech crowd, these
limits right around the point in your career where you want to be pumping in
money.

~~~
ryandrake
Those are still pretty high limits, well above the median tech salary even in
the Bay Area. If you're in "income phase out" territory you're probably not
worried about your retirement.

The thing I don't like about Roth is that you're contributing with post-tax
money during your prime working years--the time when your taxes are probably
as high as they will ever be. Especially true as a tech worker where your
salary plateaus in your 20s. I'd rather save pre-tax now, and then pay taxes
later when I'm 60 and back in the lowest tax bracket.

~~~
brewdad
My issue with the Roth is that I don't trust the rules to remain the same in
the future. I pay taxes now, before the money goes in, with the promise of
tax-free withdrawals. I fully expect that money to become taxable on the back-
end at some future time. It might be a lower rate (like capital gains today)
or be income-based, but that pot of $ will be too tempting to ignore, I fear.

~~~
djrogers
So worst case scenario is that you wind up paying the taxes you'd have paid if
you didn't use the Roth? Not really a reason to not use one when it's only a
possibility and not a certainty.

------
sgustard
More money enters when the market is hot. I expect the contribution percentage
closely mirrors the price of the S&P. The graph doesn't show the 2007-8 crash
but I'd also expect contributions dropped at that time, also providing a
depressed baseline for the current gain. Of course, people would have been
better served by contributing after the drop, and one could also be nervous
about record dollars chasing the market now at its highest point.

~~~
lintiness
along these lines, note how many news stories etc are currently touting the
power of stock indices and index investing. given a shiller pe of ~28, i'd say
most are in for a very rude awakening (again and forever).

[http://www.multpl.com/shiller-pe/](http://www.multpl.com/shiller-pe/)

~~~
jcdavis
Solely discussing stock valuations without also considering bond yields is a
little misleading. With interest rates so low on a historical basis (albeit
now possibly picking up), higher stock pricing is expected and isn't
necessarily "overpriced"

A good recent discussion of this:
[http://brooklyninvestor.blogspot.com/2016/11/bonds-down-
stoc...](http://brooklyninvestor.blogspot.com/2016/11/bonds-down-stocks-
up.html)

~~~
Jeema101
I'm not sure where that guy is getting his data, but I think the average stock
market P/E when 10 year treasury rates are in the 4-6% range is more like 19.
But maybe he's looking at 'forward P/E' or something.

[http://qvmgroup.com/invest/2013/06/22/sp-500-pes-
versus-10-y...](http://qvmgroup.com/invest/2013/06/22/sp-500-pes-versus-10-yr-
treasury-rates-from-1957/)

------
lucidguppy
If they take away my social security... I want my payments back.

~~~
umanwizard
If they cancel some welfare program (like free lunch for poor school kids), do
you want your money back that you paid into the program while it existed?

What sense does this make?

~~~
kdamken
Not the best comparison. Besides being a requirement, you pay into social
security based on the assumption that you'll get benefits when you're older.
If you paid for 20 years and then the program went bust and you didn't receive
anything, I think you'd rightly feel ripped off.

~~~
umanwizard
> you pay into social security based on the assumption that you'll get
> benefits when you're older.

No. If you think this is how social security works then you have been tricked.

Social Security is a welfare program for old people.

A better analogy is if you paid for free lunches for kids, then you have a kid
and also become poor, but they cancel the program, you'd feel ripped off.

The reason it doesn't intuitively feel the same way (even though it is) is
because middle class people have a much higher chance of ever becoming old
than ever becoming poor.

------
vinhboy
Say what you will about government incompetence, but the idea of tying things
like my retirement and healthcare to my employer just sounds terrible.

Also, auto-enrolling people into 401K sounds kinda like... ya know... social
security.

~~~
koolba
> Also, auto-enrolling people into 401K sounds kinda like... ya know... social
> security.

Companies auto enroll people into 401(k) programs because of participation
requirements. For "highly paid employees" (i.e. executives) to be allowed to
contribute to a 401(k), there requires a minimum level of participation from
the rest of the workforce at the company. The easiest way to do so is to auto
enroll people on day one.

~~~
chimeracoder
> For "highly paid employees" (i.e. executives)

Highly Compensated Employees are not just executives. Anybody who makes more
than $115,000/year qualifies, which applies to a lot of engineers. Also,
anybody who controls more than 5% of the business qualifies, whether or not
they are an executive, and regardless of their salary.

~~~
koolba
They'd qualify but I'm pretty sure when the law was first written it didn't
have them in mind. It was specifically to prevent top level executives or
business owners (>=5% of company) from creating 401k plans for only
themselves.

~~~
chimeracoder
> They'd qualify but I'm pretty sure when the law was first written it didn't
> have them in mind. It was specifically to prevent top level executives or
> business owners (>=5% of company) from creating 401k plans for only
> themselves.

Even if that was the rhetoric used when creating the rule, I'd be very
skeptical of assuming that was the case, rather than it being motivated by a
desire to increase tax revenue, as a lot of these tax rules are designed to
do. $115,000 is a really low threshold to use to define "executive" \- many
blue-collar workers make far more than that.

(And furthermore, the rule still does not prohibit highly-compensated
employees from contributing; it just requires them to pay taxes on the excess
of the permitted amount.)

~~~
koolba
> 115,000 is a really low threshold to use to define "executive" \- many blue-
> collar workers make far more than that.

Quantify "many".

$115K/year comes out to an hourly rate of $57.5 (assuming 2K hours). Even
factoring in overtime (1.5x) or double time (2x), I doubt a significant
percentage of people make that much at a blue collar job.

------
payne92
If the employer does any matching at all, a 401(k) is a no brainer in most
cases.

------
kasperni
Anyone else around here that does not have a pension account?

On the basis that technology will have changed the economic system (for good
or worse) in such fundamental ways so we either have greatly expanded life
span, "free" handouts such as basic income, or major financial busts that have
wiped out most pension savers.

~~~
rpwilcox
I would ask the inverse: anyone around here _have_ a pension account?

When I joined my current company I was given an option to join the pension
(maybe the last year it was offered to new people??). I didn't take it for a
couple reasons:

    
    
      1. figured I probably wouldn't be here for 30 years (!!!!)
    
      2. Stories of rampant pension mismanagement scare me off. (Reasonably sure it wouldn't happen with my employer, but...)

~~~
awinder
Just to clarify on #2, it doesn't even have to really be in your employer's
control. One of the biggest sales targets of mortgage-backed securities prior
to 2008 were pension plans, they were AAA-rated securities.

------
dawhizkid
I'm counting on basic income being a thing when I retire.

~~~
etjossem
Basic income will come with a corresponding increase in prices for consumer
goods across the board. As demand for everything beyond the most essential
staples goes up, prices will be adjusted upward until supply is able to
satisfy new demand.

Even if you're right, you will still want to have saved some money.

~~~
ones_and_zeros
Yes a price increase is a first order effect of demand increasing. In
capitalist economies demand is great because of the second and third order
effects.

------
astockwell
Headline is shameless click-bait. Percentage change is much more valuable than
absolute dollars. From the article: "An increase in retirement savings of 0.6
percentage points [from 2010 to 2015]".

~~~
AngrySkillzz
Reading is fundamental. 0.6 on a rate of 6.2. That's roughly 10%. What would
you do if your savings was 10% larger?

------
squozzer
Having a somewhat paranoid personality, I find myself wondering if auto-enroll
and (especially) auto-escalation - which my job has - are designed with the
employee's well-being in mind, or just a ploy to prop up the stock market?

~~~
hellogoodbyeeee
Honestly, which do you think is most likely? 1) Your HR department is part of
a nation-wide conspiracy to prop up stock market prices. 2) Your HR department
is trying to help their employees be properly prepared for retirement.

~~~
forgottenpass
3) HR don't give a fuck, and are just told to do the thing the business wants
to do because it is incenivized to do so.

The benefit to the employees and ability for HR to feel positive about their
position in the role are arbitrary. The employees could also suffer when
business wants to do something that negatively impacts them, and HR can be
used to carry that out too. e.g: Switching to a shittier health plan to save
money.

------
guelo
401k is such a scam, you get a handful of high fee funds to invest in. Wall
Street thieves billions of dollars, all sanctioned by the government and
encouraged by the financial advise industry.

Employees should only contribute to a 401k up to any employer match. Beyond
that put your money in an IRA.

~~~
saryant
My 401k has _better_ funds than I could ever get in my IRA. Yes, many 401k's
have terrible fund choices but by no means do _all_ of them fall prey to that.

Also, if you're maxing out both your IRA and 401k limits, even if you have a
lousy 401k, you now have tax-advantaged dollars that you can roll over to
Vanguard or Fidelity when you change jobs.

~~~
curiousbiped
It sucks that we have to use our employer's 401k vendor. We should be able to
have our 401k contributions sent to any valid 401k provider like
Vanguard/Fidelity/etc instead of only being able to move it when we switch
jobs.

------
chiph
With more money chasing after the same quantity of equities, I would have
thought the market prices would have been going up. But they've been
essentially flat over the past year. Even though firms have been buying back
their stock. There must be another reason why they've been stagnant.

~~~
dmoy
S&P 500 is up 20% in 2016... not sure what you're talking about.

~~~
bk_geek
S&P 500 gained approx 9.5% in 2016

~~~
dmoy
Ah you're right, I went in a bit later than the start of the year, looks like
it took a dive a bit and then went back up. So I'm up ~20% following the
S&P500, just not for the full calendar year.

