are 401(k)s a meme?

[Anonymous No.10466068]

Are 401(k)s a meme beyond employer match? Why would I put an extra 6,600 a year into an account that'll probably be taxed at a higher rate when I withdraw from it when I retire, when I could keep it liquid and do as I please with it, to be more or less risky whenever I want.

The only thing I can think of is if you expect the untaxed portion to gain so much interest that, post-tax, it'll be worth a lot more than if you had paid taxes on it and tried to grow it. Is that correct? If it is, aren't Roth 401ks and Roth IRAs useless (past employer match)?

Anyway, I have 4135/month left over after expenses. I'm thinking
550 to 401k (+550 from match), put into some random Vanguard index funds I haven't chosen yet.

0 to IRA because I can't fathom what the point is.

Then I have 3585 left. Do I put this into some more index funds with Vanguard? Is a robo broker like Betterment a better idea? I just don't want to do too much work and I'm OK with high risk in the short term.

[Anonymous No.10466082]

Put it in a roth 401k. The tax problem is solved.

[Anonymous No.10466095]

>>10466082
So if I'm understanding correctly, a Roth 401k is where I pay taxes immediately and then it goes into a 401k. Why would I do this when I can pay taxes and then keep it liquid and do what I want with it?

[Anonymous No.10466167]

Wait a minute. That untaxed portion thing doesn't make sense either.

Compound interest formula is P(1+r)^t. Either you pay taxes before or after, both ways the entire term has a multiplicative factor of the taxes. So it doesn't matter at all, so it just comes down to whether taxes will be higher later or sooner. But if you choose to bet on sooner with a 401k, then you are penalized by having a ton of your money not be liquid for 40 years.

[Anonymous No.10466224]

>>10466167
yes, your deferring when you pay your taxes to when you think you'll be in a lower tax bracket. for most people that will be in retirement, when they don't make employment income anymore.

I don't see why you think keeping your retirement fund locked up is a bad thing. unless you have a specific purchase planned then you should be leaving the majority of your investments untouched anyways.

[Anonymous No.10466231]

who the fuck is able to run a 401k you would die of exhaustion

[Anonymous No.10466301]

>>10466224
If I do 4685 a month for 30 years at 4% annually (is this conservative enough?) I end up with 3.2mil, of which *.04 withdrawal rate is 128k. But the next tax bracket is 191k and I doubt I'll ever make that much in my career.

It's just I feel if it doesn't matter, couldn't I just use that money to invest in the same funds I would do if I had a 401k but instead keep it liquid in case I want to get a mortgage or start a company? (I know you can take a loan against your 401k for mortgage but it seems more hassle than if I had it in cash)

[Anonymous No.10466335]

>>10466231

Really?

[Anonymous No.10466344]

>>10466068

All in btc problems solved

[Anonymous No.10466357]

>>10466068
Of course 401ks are a scam and meme.

I can't wait for the currency crisis to hit so all these boomers invested in their con 401k's are starving.

The ONLY retirement vehicle is real savings GOLD and SILVER.

401k's are literally more normie tier than than Reddit the website is.

Fucking boomers and brainlet tier millenials think their 401k of fake money is going to go up forever

[Anonymous No.10466402]

>>10466357
Ignore this retarded

[Anonymous No.10466466]

>>10466301
at 128k you're saving 28% at today's tax rate. unless I'm overlooking something that should be pretty significant.
you don't have to put all of your unspent savings into retirement funding. but you should have some kind of nest egg building up. starting a company with your entire life savings is a little too risky.

[Anonymous No.10466477]

>>10466402
Your fucking stupid. Every normie invests in 401k's and they are going to get absolutely fucking slaughtered either by a currencies crisis or the govt confiscating them.

Why can't people take out a 401k early unless they give up half? It's their fucking money supposedly, right? The fact that you can't take it all our without penalties means it's a fucking scam.

Gold and silver you are your own bank and inflation cat touch you.

Get an education you dumbfuck nigger

[Anonymous No.10466513]

>>10466466
Well, I'm going to have the 550*2 per month in my 401k to take advantage of the match, which ends up being 769k after 30 years. But I wasn't really planning on starting a company anyway. But maybe if I decided to retire earlier (I really don't need 128k a year, [orat least I say that now]), it could be beneficial to have it liquid if there's point otherwise.

>at 128k you're saving 28% at today's tax rate.
Sorry, I don't understand what you mean by this. 28% on what?

[Anonymous No.10466589]

>>10466068
>>10466095
>>10466167

Because you pay no taxes on capital gains in a 401k or IRA. In a normal non-retirement account you'd buy in with after tax money. Then you have to pay additional tax on capital gains. In a roth retirement account you still buy in with after tax money, but withdrawals are tax free. That's a clear benefit: you pay no capital gains. A traditional retirement account is the same as the roth but in addition the taxes are deferred, meaning you buy in with pre-taxed income, then you pay tax when you withdrawal.

If the tax rate is the same, there is no difference between a roth and traditional retirement account. The math works out the same. You should choose one or other purely based on whether you anticipate your taxes to be higher now or when your retire. A traditional might be useful in weird scenarios if you need to reduce your income to quality for some deduction or if you have a big anticipated tax bill and worry about being able to pay it all. While some people prefer roth because taxes are currently abnormally low historically, and they anticipate higher tax rates in the future.

Although you need to check the expense ratios of the fund available in your 401k. Sometimes companies have shitty options and only provide funds with ridiculous expense ratios. Often times the expense ratio of a fund actually negates any tax benefit compared to just investing in an index fund with 0.15% in a non-retirement account.

[Anonymous No.10466592]

>>10466357
>GOLD and SILVER

[Anonymous No.10466608]

>>10466357
This is the opinion I agree with for the simple fact that the 401k system is the greatest ponzi ever created for corporations and wall street to rape their employees even harder.

[Anonymous No.10466623]

>>10466068
If you like supporting boomer retirement with your Social Security payments but really wish you could give boomers more money, 401ks are for great!

[Anonymous No.10466624]

>>10466589
>Because you pay no taxes on capital gains
I think this is what I've been missing. To clarify, I don't pay any tax on the difference between the total value of the account and how much I put in myself? That actually sounds pretty good then, because otherwise your gains would be taxed by 33%.

So then, I should only *not* max out 401k and IRA if I expect that I can earn 50% more than I would in a 401k account? (Assuming 33% tax for simplicity).

[Anonymous No.10466659]

>>10466068
Cmon OP the employer is literally reducing your salary and everyone elses to cover that match. It's obviously just a big scam. In what other situation in life do you get free money from anybody, let alone an employer? Be more skeptical about this, I guarantee it will lead down a road to understanding that 401k type of investments are fucking you over more than they are helping you.

[Anonymous No.10466711]

Compound interest is a scam

[Anonymous No.10466729]

>>10466624

Yep, anything you do in a retirement account is tax free. You either pay taxes on the way in (roth) or on the way out (tradition), that's it. You can also sell it for cash when you want, and pay no tax, you just can't withdraw it early without paying penalties. There are some exceptions, I think you might actually be able to withdraw some for a house, not sure.

>So then, I should only *not* max out 401k and IRA if I expect that I can earn 50% more than I would in a 401k account? (Assuming 33% tax for simplicity).

The math changes with how much return you expect in your 401k, but that is the concept yes. You can also have both and but your higher tax investments like REITs in your retirement account, and low tax investments in your non-retirement.

[Anonymous No.10466731]

>>10466711
Let me edit this

Compound interest as a wealth building tool is a scam.

[Anonymous No.10466737]

>>10466711
No, compound interest is not a scam. But a system in which you consistently give money to this entity which magically matches it up to a certain level and then holds onto it for you for 45 years and promises that it is somehow in your moneys best interest sounds fishy to say the least. Further evaluation of things like inflation, how the employer funds the match, the fees associated, the fact that you don't know what the tax or age of pullout will be like 45 years later, among other things make it a sketchy investment objectively. Now, if we wanna talk buying tangible assets, for example putting some solar panels on your roof, that would be a better alternative imo.

[Anonymous No.10466750]

>>10466737
In addition, who knows that the US stock market will do as well as it has for these boomers within 45 years? With the rise of countries like China, the dollar weakening, and the US on the brink of civil and middle east war... It doesn't look to good for 401k investors

[Anonymous No.10466785]

>>10466750
Not to mention that as more and more boomers pullout, the youth is funding their liquidity at age 65 or 59.5. At younger ages, looking forward, and this also applies to social security, it will not necessarily be as beneficial as 401k used to be for boomers.

[Anonymous No.10466804]

>>10466729
Wait, but according to https://finance.zacks.com/pay-capital-gains-traditional-ira-4110.html, the issue is although you don't pay capital gains tax, you have to pay the income tax which is higher than the capital gains tax, right? (long-term capital gains is 15-20% and income is 30%+)

If I buy some index funds in a non-retirement account and let Betterment handle it for n years, could the capital gains taxes from doing whatever trading they do end up being more costly than the later 30% from the retirement account?

So does this shift that 50% number lower?

What the fuck why is this so complicated. This is probably one of the easier routes to go through too, since I don't want to do real estate or stocks or anything complicated. Do other countries make this easier?

>>10466785
I'm not even expecting to get social security (T. my junior year US history teacher)

[Anonymous No.10466831]

>>10466344
Literally this.
Opt out of everything that's a scam and put it in our digital Chuck e cheese tokens.

[Anonymous No.10466832]

I thought this way at first as well, or "why would I lock the money away until I was 55"

but the point is that if you have so much excess income that you can easily max out a 401k and still have plenty to spare, it may make perfect sense

>make $xxx,xxx/year
>make so much more than you need to live off per year that you want to start and investment portfolio
>single filer, meaning the government penalizes you for not (((manning up and providing))) and taxes you at the most severe rates
>401k, IRA, and HSA show up and let you prevent the government from immediately taking the money you earn and turning it into gimmedats for nignogs, single mothers, and defense contractors, as well as allowing you to hold mutual funds for decades without incurring any tax on dividends and capital gains distributions

it is actually by far the best way to hold securities in America today

as for locking it in for a long time
1. you can withdraw it earlier should you retire early using a Roth IRA ladder
2. investments, both passive and active, but especially low cost passive investments, fundamentally rely on the fact that you won't touch them for thirty years in the first place, meaning that the timeline on tax advantaged accounts actually coincides with that
3. 55 isn't nearly as far away as you might think, boomer

[Anonymous No.10466837]

>>10466167

Tax free growth has a stronger compounding effect than tax free withdrawals. It's easier to reduce taxes in retirement, at least for now. I have no doubt we're eventually going to get a communist president like Warren or bernie, and taxes with be 99%+ to import more rapefugees.

Regardless, stocks are horrible investments. We're going to be Japan tier after the next crash, and have stagnant growth for decades.

[Anonymous No.10466861]

>>10466804

Retirement account is 0% capital gains, which is better than long or short term. Remember, you're paying income tax no matter what. Capital gains are the addition tax.

Yes, it is complicated as fuck. There is no way to min/max it just do what you think makes sense. Might be worth while going through a few scenarios:

Non-retirement:
Make $10k, say $7k after taxes (30%)
Say you double your investment, so you have $14k.
Assuming 20% capital gains you have $12.6k at the end

Roth:
Make $10k, $7k after taxes
Your investment doubles, so you have $14k and its tax free

Traditional:
Make $10k, pay no tax up front
Doubles to $20k, but you have to pay tax
At the same 30% rate that's $14k, same as roth

HSA:
Make $10k, pay no tax
Doubles to $20k, and its tax free

[Anonymous No.10466896]

>>10466068
It really depends on what investmen bank your employer uses for your 401ks and what funds they offer. If you have a low expense S&P 500 index fund available (like 0.03% or lower) that is worthwhile, if they only have shitty managed funds that charge 0.5% or more, or they have extra fees, forget it and set up a roth IRA in Vanguard and buy 90% s&p and 10% bond index. but either way the earlier you start the more money you will have when you retire. if the market falls stay investing the same %, don't panic sell. slow and steady investing with compounding gains is by far the easiest way to make it.

[Anonymous No.10466912]

>>10466832
So, to sum up if we think lonng-term, with a retirement account I don't pay income tax now, don't pay capital gains, but pay income tax later.
As opposed to paying income tax now, and then pay capital gains everytime I move something?
Then it seems more clear that the retirement account is better.

>>10466861
Okay, I think I understand now, it's about single tax vs double tax. My last question is: let's say I only want 90k or less a year (one tax bracket lower) when I retire, both because I don't need that much money and for tax reasons. In this case it would be better to do a traditional retirement account? Is it easy to set it up to withdraw less? Can they force you to withdraw more per year to put you in another bracket?

>>10466896
I'm not sure what they offer yet, I start on Wednesday so I'll have to check then. Yeah, I'm in it for the long term.

[Anonymous No.10466931]

btw go check out firecalc.com and punch in numbers in all of the tabs and see how much you need to save every month and when you can retire having made it

[Anonymous No.10466950]

>>10466861
HSA sucks though because you can only use it for medical expenses. If you take care of yourself healthily (i.e. eat legumes like beans and grains like rice, eat a good amount of fruits and veggies, exercise daily) theoretically you'd be fine in most scenarios until old age

UNLESS it's some viral or serious disease or accident, because honestly even people that take care of themselves die, look at Jack Lallane who was working out like he always did doing 500 pushups / sit ups at 96 and died from a cold after going to sleep but maybe he shouldn't have been working out with a cold, but just imagine being that fit and still dying after going to sleep one day

[Anonymous No.10466985]

>>10466912
>Then it seems more clear that the retirement account is better.

mutual funds, at least once a year, but if it's something like a bond fund or REIT than usually monthly, will put out dividends and capital gains distributions in cash, that you have to be taxed on every single year

not only that but in tax advantage space you can buy an sell in order to rebalance your asset allocation at any time with no tax impact, you can't do the same in a taxable account

also as an ERISA account, it's protected in the case of bankruptcy or lawsuit

>Can they force you to withdraw more per year to put you in another bracket?
they can actually do this with traditional IRA's (Required Minimum Distributions) when you turn 70

[Anonymous No.10466986]

>>10466931
Not sure if I did it right, I skipped all the optional steps because I didn't understand them. I get a lot more from social security than I expected, 20k a year is a lot. I still doubt I'll end up getting it though

[Anonymous No.10467059]

>>10466068

401ks are ok for saving, especially with the employer match. Without it... they're not the worst but they've been overhyped. Roth IRAs are actually pretty nice for saving if you want to accumulate money for investments. You put it in post-tax, invest it and accumulate interest, and take it out whenever the fuck you feel like it without a tax penalty because it's your money and you already paid taxes on it. Roth IRAs are good for keeping some cash stashed away that's can be easily liquidated and accessed relatively quickly when you need money--they beat the shit out of traditional savings and money market accounts because of that.

[Anonymous No.10467060]

>>10466986
if you are in your 20s and you can save 20k per year for retirement (adjusted for inflation) you are comfy as fuck and will retire in style

[Anonymous No.10467072]

>>10466950
I thought HSA was dumb too until I realized it was meant to be used in conjunction with a high deductible health plan (it makes even more sense under the Obamacare mandate, which means you have no choice but to be insured)

if the high deductible plan isn't total fucking garbage, its monthly premium will be super low or even entirely covered by your employer (obviously in exchange the deductible is high)
if you're healthy and have no medical expenses, you'll have the option with the cheapest monthly premiums and more tax advantage space to invest with, and then you can make regular withdrawals for any reason at 65 (but this amount will be much smaller than any other account because you can only put in $3450/year max INCLUDING any possible employer contribution)

however if something happens and you get really fucked up and your hospital bill is massive, you only need to pay out of the HSA with pretax money for the amount of the deductible

[Anonymous No.10467073]

So for this account you need to have $401k?

[Anonymous No.10467084]

>>10467060
DollAr will be lucky to make it another 10 years.

Only gold and silver is the answer

[Anonymous No.10467143]

>>10467084
what will you do when with all your gold and silver when the dollar "doesn't make it"?
are you gonna eat it?

[Anonymous No.10467145]

>>10467084
dont get me wrong i own gold and silver too, but they are non productive assets that will AT BEST keep up with inflation and temporarily spike in value when speculation or economic crashes happen. They are a hedge, not an investment vehicle, in a sound retirement plan.

[Anonymous No.10467147]

>>10467060
as long as I don't get married desu. Luckily that's not really even a possibility

>>10467072
So the deal with HSAs is if no health problem, then good, we saved money not paying a lot for monthly insurance. If there is a health problem, then the high deductible is offset by the fact that we didn't have to pay tax for it?

Wikipedia says the highest deductible is 6,650. Does one "insurance claim" cover something like total costs for one disease, like cancer? Or is it charged per each surgery or something?

[Anonymous No.10467162]

A lot of misinformation ITT. It's all pretty simple.
Contribute up to the 401k company match, any money left over put in Roth IRA up to 5k or whatever it is now. Still have money left over then put back in 401k or DOYR and buy a small biz($10k) like ATMs or vending, etc.... This is the "I want to put in the minimal amount of effort" approach. Now listen if your want some risk pick a 401k fund such as emerging markets or if you're scared like me pick a stable value fund that paces inflation. And lastly /biz/ is the worst place for advice, can't trust anyone.

[Anonymous No.10467163]

>>10466068
let's say most of this board is in their 20s (fair assumption). most of us won't be 65+ for another 40 years or so.

do you really think the American dollar is going to be worth shit in 40 years? do you really think the US is not going to be in a state of complete turmoil given its demographic destiny? do you really think these enormous debt/stock bubbles aren't going to pop and inflation isn't going to soar?

[Anonymous No.10467171]

>>10467162
>"lots of misinformation itt"
>recommends meme funds
t. boomer

[Anonymous No.10467194]

>>10467163
I'm one of those brown immigrants (well, 2nd gen) you hate friendo. In response to your questions I have no clue, I even took micro/macro in high school and didn't understand a thing. That's why I hope our bureaucrats at the Fed can handle it =)

>>10467162
ok, with you until the business part, that seems like a lot of paperwork. Can't I just give vanguard the extra money I have?

[Anonymous No.10467227]

>>10467194
and you and people like you are the reason the US has gone to shit and will continue to do so. have fun.

[Anonymous No.10467249]

>>10467227
neck yourself, anon is asking how to best save for retirement not how to sign up for gibs,

[Anonymous No.10467279]

>>10466231
computers put your money into weak faggot shit like bonds

[Anonymous No.10467308]

>>10467147
I think 6650 is the max out of pocket cost, however if a plan has no coinsurance I'm not sure how you would ever end up paying that much
by law the minimum deductible for a single person on a plan is $2600 pretty sure, so if you pay that much in a year, any remaining insurance claims for the year are covered
if an HMO costs $200/month in premiums and the high deductible costs $0/month you would be burning that same amount on premiums anyway
thanks to Obamacare there are no lifetime limits to coverage

>>10467163
yes

brainlet

[Anonymous No.10467343]

>>10467163
Why would you keep American dollars in a 401k? That sounds like the stupidest thing ever.

[Anonymous No.10467406]

>>10467194
Up to you, I can tell you want to go with the minimal effort approach, actually pretty smart too, let others do the research and analysis. I'm serious, it takes a ton of time time analyze all this shit. Only run a business if your car and closet is organized, otherwise hire a good manager.

[Anonymous No.10467491]

>>10466513
You're making a poor decision. With a Roth, you can pull out what you put in tax free. Considering your income, the traditional or 401k option is a better option.

Your illiquid argument is invalid as you shouldn't be touching youre retirement funds. I suspect, you want to fool around with the money which will likely lead to poor outcomes.

Fyi, I think one of the understated benefits of these accounts is behavioral. There's a lot of things put in place to dissuade people from acting from short sightedness.

I think the 28% other anon was talking about is diff in tax rate.

[Anonymous No.10467508]

>>10467406
yeah, this stuff doesn't interest me too much, I'd rather just read manga and /lit/, cook and code random stuff in my free time rather than worrying about stocks, don't mind too much if I don't get the best return.

>>10467308
I think I'm still on my parents plan for another 4 years so I guess I'll learn more about this later.

Thanks everyone for all your help

>>10467491
Yeah, I ended up realizing that the retirement accounts are better, I didn't understand the capital gains thing before.

[Anonymous No.10467511]

>>10467147

Insurance is complicated as fuck, honestly. Basically, the HSA goes along with a high dedictible health plan that hopefully your employer pays for. If you don’t have big health expenses, then great. If you do... then you still get the insurer’s “discount rates” that you pay, not the uninsured “charge master” prices that radically inflate prices for people without insurance. Those discounts are huge: a doctor’s visit is $70 instead of $150. My 4 prescription meds cost less than $2 a month. Etc.

Health insurance also has “out of pocket maximums,” meaning the most you can get hit for in a year is X amount. If you do get a bill that’s higher than the amount in your account, you simply negotiate an installment plan and then pay the monthly installments from your HSA to save on taxes. You can also use the HSA for vision, dental, and therapy expenses, as well as prescription drugs and medical equipment. For example, I have an HSA with a $4000 dedictible family insurance plan. My employer pays for it completely and puts $2500 into that account (I pay, at most, $1500 myself before we hit the dedictible)—otherwise I’d have paid $500 a month for a $1500 dedictible plan that I’d pay for all by myself (at least $6000 a year and still have the same amount to pay out of pocket). This year my wife was pregnant, so we’ve maxed out our deductible and, on our family plan, she hit her maximum out of pocket expenses of $7250. We’ve negotiated payment plans so my employer’s monthly contributions of over $200 will pay all of the remaining balance over 2-3 years and I will pay very little of my own money into it.

Another nice thing is that once you have a $1000 balance, you can start investing it into mutual funds to make the money grow (or lose money if you risk it) with zero capital gains or taxes ever. If you get a big balance, you simply stop contributing and just use that. Any remaining money in the account when you die can be passed down to your heirs.

[Anonymous No.10467537]

>>10467163

Do you really think we won’t survive a stock market crash and recover just like we always have? Everyone’s so fucking apocalyptic on here. If you’re living on investment income and your investments go bust right when they’re your only source, you’re fucked, but most people can survive and shift money to bonds and more stable investments as they near retirement age.

[Anonymous No.10467543]

>>10467343

They’re matched by your employer up to a certain amount and invested into stocks and bonds, brainlet.

[Anonymous No.10467575]

>>10467072
To be clear, if you take distributions for non medical reasons over 65 you will not be subjected to penalties. You will, I believe, have to pay taxes on the distribution

[Anonymous No.10467599]

>>10466477
>he doesn't know how to withdraw it without penalties
Keep huffing those gold fumes

[Anonymous No.10467602]

>>10467162
This made me smile. A big benefit i'f retirement accounts is tax free growth. Putting low growth "stable" investments in the, assuming its not warranted by your age, minimizes that benefit

[Anonymous No.10467622]

With regard to hsa, a lot of times companies throw in an extra 500 or 1000 dollars to help defray cost of higher deductible

[Anonymous No.10468243]

>>10466068
I have something a little over $2600 in an IRA in a 2060 fund. projected monthly income at retirement just over $1200 how the fuck

[Anonymous No.10468279]

>>10466804
Realistically anon, you are not only not going to get social security but you will be forced to work into your 70’s to support yourself.

[Anonymous No.10468294]

>>10467599
Hi Aralynn

[Anonymous No.10468299]

Take the company match no matter what. Set up a Roth IRA and throw some money there, which will take some guess work out of having to worry about whether you’ll be in a higher or lower tax bracket at retirement. Then throw a few percent in a HSA if you have one and pick a nice safe 60/40 stock/bond fund. HSAs are criminally underrated